Reebok 2008 Annual Report Download - page 178

174 Consolidated Financial Statements Notes
The actuarial assumptions as at the balance sheet date are used to determine the defi ned
benefi t liability at that date and the pension expense for the upcoming fi nancial year.
The actuarial assumptions for employee turnover and mortality are based on empirical data,
the latter for Germany on the Heubeck 2005 G mortality tables.
Since January 1, 2005, due to application of the amendment to IAS 19 “Employee Benefi ts”
issued in December 2004, the Group recognises actuarial gains or losses arising in defi ned
benefi t plans during the fi nancial year immediately outside the income statement in the state-
ment of recognised income and expense (SoRIE). The actuarial gain recognised in this statement
for 2008 amounts to € 3 million (2007: € 18 million). The cumulative recognised actuarial losses
amounted to € 9 million (2007: € 12 million) see also Note 21.
The expected return on plan assets assumption is set separately for the various benefi t plans.
The return on plan assets for the funded benefi t plan in Germany is based on the overall surplus
sharing of the insurance company.
Pension expenses for defi ned benefi t plans
€ in millions
Year ending
Dec. 31, 2008
Year ending
Dec. 31, 2007
Current service cost 12 12
Interest cost 9 7
Expected return on plan assets (4) (4)
Pension expenses 17 15
Of the total pension expenses, an amount of € 12 million (2007: € 12 million) relates to employ-
ees in Germany. The pension expense is recorded within the operating expenses whereas the
production-related part thereof is recognised within the cost of sales.
Defi ned benefi t obligation
€ in millions
2008 2007
Defi ned benefi t obligation as at January 1 171 170
Currency translation differences (4) 2
Current service cost 12 12
Interest cost 9 7
Contribution by plan participants 1 —
Pensions paid (6) (6)
Actuarial gain (11) (14)
Defi ned benefi t obligation as at December 31 172 171
Status of funded and unfunded obligations
€ in millions
Dec. 31, 2008 Dec. 31, 2007
Present value of unfunded obligation 120 114
Present value of funded obligation 52 57
Present value of total obligations 172 171
Fair value of plan assets (53) (60)
Recognised net liability for defi ned benefi t obligations 119 111
thereof defi ned benefi t liability 124 115
thereof defi ned benefi t asset (5) (4)
The calculations of assets and liabilities recognised from defi ned benefi t plans are based upon
statistical and actuarial calculations. In particular, the present value of the defi ned benefi t
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 benefi ts.
Furthermore, the Group’s independent actuaries use statistically based assumptions covering
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 interest rates,
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 recognised in the balance sheet in future periods.