Reebok 2011 Annual Report Download - page 201

adidas Group
2011 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
197
2011
197
2011
04.8 Notes Notes to the Consolidated Statement of Financial Position
The asset ceiling effect arises from the German funded defined benefit
plan and is recognised in the consolidated statement of comprehen-
sive income.
The determination of assets and liabilities for defined benefit
plans is based upon statistical and actuarial valuations. In particular,
the present value of the defined benefit obligation is driven by financial
variables (such as the discount rates or future increases in salaries)
and demographic variables (such as mortality and employee turnover).
The actuarial assumptions may differ significantly from the actual
results, i.e. the present value of the actual future performance may
differ from the reported present value.
Actuarial assumptions (in %)
Dec. 31, 2011 Dec. 31, 2010
Discount rate 4.3 4.6
Expected rate of salary increases 3.3 3.3
Expected pension increases 2.1 2.0
Expected return on plan assets 4.8 5.3
The actuarial assumptions as at the balance sheet date are used to
determine the defined benefit liability at that date and the pension
expense for the upcoming financial year.
The actuarial assumptions for withdrawal and mortality rates are
based on statistical information available in the various countries, the
latter for Germany on the Heubeck 2005 G mortality tables.
The Group recognises actuarial gains or losses arising in defined
benefit plans during the financial year immediately outside the income
statement in the consolidated statement of comprehensive income.
The actuarial losses recognised in this statement for 2011 amount to
€ 13 million (2010: € 13 million). The accumulated actuarial losses
recognised amount to € 51 million (2010: € 38 million).
The expected return on plan assets assumption is set separately
for the various benefit plans. Around 90% of the plan assets are
related to plan assets in the UK, Germany and Switzerland. The
overall expected rate of return on assets is derived by aggregating the
expected rate of return for each asset class over the underlying asset
allocation. Historical markets are studied and expected returns are
based on widely accepted capital market principles.
In the UK, the assumed long-term rate of return on each asset
class is assumed to be in line with long-term government bonds, with
an additional investment return of 3.5% for equity securities and 1.0%
for corporate bonds.
In Germany, the plan assets are invested in insurance contracts
and in a pension fund, and the expected return on assets is set equal
to the expected return on the underlying insurance contracts.
The plan assets in Switzerland are held by a pension foundation
and the expected rate of return is calculated as a weighted average
per asset class, based on the investment strategy and the expected
return on the varying asset categories.
In the rest of the world, the plan assets consist predominantly of
insurance contracts, with the expected return based on the expected
return on these insurance contracts.
Pension expenses for defined benefit plans (€ in millions)
Year ending
Dec. 31, 2011
Year ending
Dec. 31, 2010
Current service cost 12 11
Interest cost 11 10
Expected return on plan assets (4) (4)
Pension expenses for defined benefit plans 19 17
Of the total pension expenses, an amount of € 13 million (2010:
€ 13 million) relates to employees of adidas AG. The pension expense
is recorded within the other operating expenses whereas the
production-related part thereof is recognised within the cost of sales.
Present value of the defined benefit obligation (€ in millions)
2011 2010
Present value of the defined benefit obligation
as at January 1 237 207
Currency translation differences 3 7
Current service cost 12 11
Interest cost 11 10
Contribution by plan participants 0 0
Pensions paid (10) (12)
Actuarial loss 10 14
Plan settlements (3) –
Present value of the defined benefit obligation
as at December 31 260 237
Fair value of plan assets (€ in millions)
2011 2010
Fair value of plan assets at January 1 67 61
Currency translation differences 2 3
Pensions paid (3) (5)
Contributions by the employer 4 3
Contributions paid by plan participants 0 0
Actuarial (loss)/gain (4) 1
Expected return on plan assets 4 4
Plan settlements (3) –
Fair value of plan assets at December 31 67 67