Reebok 2010 Annual Report Download - page 198

194 Consolidated Financial Statements Notes
Pensions and similar obligations Pensions and similar obligations
Provisions and expenses for pensions and similar obligations relate to the Group’s obligations
for defined benefit and defined contribution plans. Obligations under defined benefit plans are
determined separately for each plan by valuing the employee benefits accrued in return for their
service during the current and prior periods. These benefit accruals are discounted to determine
their present value, and the fair value of any plan assets is deducted in order to determine the net
liability. The discount rate is set on the basis of yields at the balance sheet date for high-quality
corporate bonds. Calculations are performed by qualified actuaries using the “projected unit credit
method” in accordance with IAS 19 “Employee Benefits”. Obligations for contributions to defined
contribution plans are recognised as an expense in the income statement as incurred.
In addition to recognising actuarial gains and losses in the income statement according to
the “corridor method”, the amendment to IAS 19 issued in December 2004 grants the option to
immediately recognise actuarial gains and losses within equity. As of January 1, 2005, the Group
utilises this option in order to avoid earnings volatility and recognises actuarial gains or losses
for defined benefit plans arising during the financial year immediately in “other reserves” within
equity, as shown in the consolidated statement of comprehensive income.
Recognition of revenues Recognition of revenues
Sales are recognised at the fair value of the consideration received or receivable, net of returns,
trade discounts and volume rebates, when the significant risks and rewards of ownership of the
goods are transferred to the buyer, and when it is probable that the economic benefits associated
with the transaction will flow to the Group.
Royalty and commission income is recognised based on the contract terms on an accrual
basis.
Advertising and promotional expenditures Advertising and promotional expenditures
Production costs for media campaigns are included in prepaid expenses (other current and non-
current assets) until the services are received, and upon receipt expensed in full. Significant media
buying costs are expensed over the intended duration of the broadcast.
Promotional expenses that involve payments, including one-time up-front payments for
promotional contracts, are expensed on a straight-line basis over the term of the agreement.
Interest Interest
Interest is recognised as income or expense as incurred (using the “effective interest method”)
with the exception of interest that is directly attributable to the acquisition, construction or
production of a qualifying asset. This interest is capitalised as part of the cost of the qualifying
asset.
Income taxes Income taxes
Current income taxes are computed in accordance with the applicable taxation rules established in
the countries in which the Group operates.
The Group computes deferred taxes for all temporary differences between the carrying
amount and the tax base of its assets and liabilities and tax loss carry-forwards. As it is not
permitted to recognise a deferred tax liability for goodwill, the Group does not compute any
deferred taxes thereon.
Deferred tax assets arising from deductible temporary differences and tax loss carry-forwards
which exceed taxable temporary differences are only recognised to the extent that it is probable
that the company concerned will generate sufficient taxable income to realise the associated
benefit.
Income tax is recognised in the income statement except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Equity compensation benefits Equity compensation benefits
Stock options were granted to members of the Executive Board of adidas AG as well as to the
managing directors/senior vice presidents of its affiliated companies and to further senior
executives of the Group in connection with the Management Share Option Plan (MSOP) of
adidas AG see also Note 38. For the final time in 2009, the company had the choice to settle its
arising obligations by issuing new shares or providing the equivalent cash compensation. The
company decided to issue new shares, whereby the proceeds were credited net of any transaction
costs to share capital and capital surplus.
In accordance with IFRS 2 “Share-based Payment”, an expense and a corresponding entry to
equity for equity-settled stock options is recorded.
Estimation uncertainties and judgementsEstimation uncertainties and judgements
The preparation of financial statements in conformity with IFRS requires the use of assumptions
and estimates that affect reported amounts and related disclosures. Although such estimates
are based on Management’s best knowledge of current events and actions, actual results may
ultimately differ from these estimates.
The key assumptions concerning the future and other key sources of estimation uncertainty
at the balance sheet date which have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are outlined in the
respective Notes, in particular goodwill see Note 12, trademarks see Note 13, other provisions
see Note 19, pensions see Note 23, derivatives see Note 28 as well as deferred taxes see Note 33.
Judgements have for instance been used in classifying leasing arrangements as well as in
determining valuation methods for intangible assets.