Reebok 2006 Annual Report Download - page 168

Consolidated Financial Statements ›
164 ANNUAL REPORT 2006 › adidas Group ›
The actuarial valuations of the defined benefit plans are made at the end of each reporting
period. The assumptions for employee turnover and mortality are based on empirical data, the
latter for Germany on the 2005 version of the mortality tables of Dr. Heubeck. The actuarial
assumptions in Germany and in other countries are not materially different.
As of January 1, 2005, due to application of the amendment to IAS 19 “Employee Benefits”
issued in December 2004, the Group recognizes actuarial gains or losses of defined benefit
plans arising during the financial year immediately outside the income statement in the state-
ment of recognized income and earnings (SoRIE). The actuarial gain (loss) recognized in the
statement of recognized income and expense for 2006 was € 2 million (2005: € 14 million) The
cumulative recognized actuarial losses amount to € 30 million (2005: € 31 million) (see also
Note 22).
Of the total pension expenses, an amount of € 7 million (2005: € 11 million) relates to em-
ployees in Germany. Contributions to post-employment benefit plans for employees living in
Germany for the year ending December 31, 2007, are expected to amount to € 11 million. The
pension expense is recorded within the operating expenses whereas the production-related
part thereof is recognized within the cost of sales.
The calculations of the recognized assets and liabilities from defined benefit plans are based
upon statistical and actuarial calculations. In particular, the present value of the defined ben-
efit obligation is impacted by assumptions on discount rates used to arrive at the present
value of future pension liabilities and assumptions on future increases in salaries and benefits.
Furthermore, the Group’s independent actuaries use statistically based assumptions cover-
ing areas such as future participant plan withdrawals and estimates on life expectancy. The
actuarial assumptions used may differ materially from actual results due to changes in market
and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of
participants and other changes in the factors being assessed. These differences could impact
the assets or liabilities recognized in the balance sheet in future periods.
The plan assets are invested in several pension funds. The return on plan assets is in confor-
mity with the current strategy of the pension funds. In 2006, the actual return on plan assets
was € 2 million.
Pension Expenses € in millions
Year ending Dec. 31
2006 2005
Current service cost 7 9
Interest cost 5 5
Expected return on plan assets (1) —
Pension expenses 11 14
Defined Benefit Obligation € in millions
2006
Defined benefit obligation as at January 1 131
Increase in companies consolidated 34
Currency translation differences 1
Current service cost 7
Interest cost 5
Pensions paid (6)
Actuarial loss in 2006 (2)
Defined benefit obligation as at December 31 170
Status of Funded and Unfunded Obligations € in millions
Dec. 31 Dec. 31
2006 2005
Present value of unfunded obligation 110 131
Present value of funded obligation 60 —
Present value of total obligations 170 131
Fair value of plan assets (44)1) —
Recognized Liability for defined benefit obligations 126 131
1) Part of the € 46 million total of plan assets cannot be deducted, as it is not possible to use the exceeding amount for another plan.
Movement in Plan Assets € in millions
2006
Fair value of plan assets at January 1 —
Increase in companies consolidated 25
Contributions paid into the plan 20
Expected return on plan assets 1
Fair value of plan assets at December 31 46