Adidas 2005 Annual Report Download - page 147

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143
Consolidated Financial Statements (IFRS)
Similar obligations include mainly long-term liabilities under a deferred compensation plan.
The funds withheld are invested by the Group on behalf of the employees in certain securities,
which are presented under long-term fi nancial assets (see note 13). Once the Company has
paid the contributions due, it is not obliged to provide any further benefi ts The total expense
for defi ned contribution plans amounted to € 14 million in 2005 (2004: € 20 million). All other
pension plans are unfunded defi ned benefi t plans.
Defi ned Benefi t Plans
The actuarial valuations of the defi ned benefi t plans are made at the end of each reporting
period. The assumptions for employee turnover and mortality are based on empirical data,
the latter on the 2005 version of the mortality tables of Dr. Heubeck (2004: 1998 version). The
actuarial assumptions for other countries are not materially different.
As of January 1, 2005, due to application of the amendment to IAS 19 “Employee Benefi ts”
issued in December 2004, the Group recognizes actuarial gains or losses of defi ned benefi t
plans arising during the fi nancial year immediately outside the profi t and loss account in the
statement of recognized income and earnings (SoRIE). Prior year fi gures have been adjusted
accordingly, due to this change in accounting policy. However, net income was not changed as
it was not necessary to recognize actuarial gains or losses pursuant to the corridor approach
of IAS 19 in 2004. The actuarial loss recognized in the statement of recognized income and
earnings for 2005 was € 15 million (2004: € 12 million) The cumulative actuarial losses recog-
nized in the SoRIE amount to € 31 million (2004: € 17 million).
Of the total pension expenses, an amount of € 11 million (2004: € 10 million) was related to
employees in Germany. Expected contributions to post-employment benefi t plans for em-
ployees living in Germany for the year ending December 31, 2006, are expected to amount
to € 7 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 defi ned benefi t plans are based
upon statistical and actuarial calculations. In particular, the present value of the defi ned ben-
efi 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 withdrawals of participants from the plan and estimates on life expect-
ancy. 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.
Actuarial Assumptions
Dec. 31 Dec. 31
2005 2004
Discount rate 4.0% 4.75%
Salary increases 3.0% 1.5%
Pension increases 1.5% 1.5%
Pension Expenses € in thousands
Year ending December 31
2005 2004
Current service cost 8,741 8,624
Interest cost 4,819 5,088
Pension expenses 13,560 13,712
Defi ned Benefi t Obligation € in thousands
Provision as at December 31, 2004 100,739
Actuarial loss before 2005 17,355
Defi ned benefi t obligation as at January 1, 2005 118,094
Disposal of discontinued operations (10,742)
Currency translation differences 453
Pension expenses 13,560
Pensions paid (4,985)
Actuarial loss in 2005 14,734
Defi ned benefi t obligation as at December 31, 2005 131,114
Experience Adjustments on Plan Liabilities € in thousands
Dec. 31 Dec. 31
2005 2004
Present value of defi ned benefi t obligation 131,114 118,094
Less: plan assets – –
Defi cit in the plan 131,114 118,094
Experience adjustments on plan liabilities 1,390 –
Notes to the Consolidated Balance Sheet