Airbus 2015 Annual Report Download - page 230

AIRBUS GROUP FINANCIAL STATEMENTS 2015 l 48 l
Notes to the IFRSConsolidatedFinancialStatements
2.6 Employees Costs and Benefits
is the statutory funding objective under the Pensions Act part
6 2004, which is to have sufficient and appropriate assets to
cover the Scheme’s obligations. Since 1November 2013, this
plan is generally closed for new joiners, who participate in a
separate defined contribution plan.
Moreover, the Group participates in the UK in several funded
trustee-administered pension plans for both executive and
non-executive employees with BAE Systems being the principal
employer. These plans qualify as multi-employer defined benefit
plans under IAS19 “Employee benefits”. The Group’s most
significant investments in terms of employees participating in
these BAE Systems UK pension plans is Airbus Operations Ltd.
Participating Airbus Operations Ltd. employees have continued
to remain members in the BAE Systems UK pension plans due
to the UK pension agreement between the Group and BAE
Systems and a change in UK pensions legislation enacted in
April2006.
Based on the funding situation of the respective pension
schemes, the pension plan trustees determine the contribution
rates to be paid by the participating employers to adequately
fund the schemes. The different UK pension plans in which
the Group investments participate are currently underfunded.
BAE Systems has agreed with the trustees various measures
designed to make good the underfunding. These include
(i) regular contribution payments for active employees well
above such which would prevail for funded plans and (ii) extra
employers’ contributions.
Based on detailed information about the different multi-employer
pension schemes provided by BAE Systems, the Group is able to
appropriately and reliably estimate the share of its participation
in the schemes, i.e. its share in plan assets, defined benefit
obligations (“DBO”) and pension costs. The information enables
the Group to derive keys per plan to allocate for accounting
purposes an appropriate proportion in plan assets, defined
benefit obligations and pension costs to its UK investments
as of the reporting date, taking into account the impact of
contributions as well as future extra contributions agreed by
BAE Systems with the trustees. Therefore, the Group accounts
for its participation in BAE Systems’ UK defined benefit schemes
under the defined benefit accounting approach in accordance
with IAS19.
In 2015, the share of Airbus in BAE Systems’ main scheme
amounts to 20.96% (in 2014: 19.65%). The impact of this change
is mainly reflected in the remeasurements of the period.
BAE Systems, Airbus and the trustees agreed to work towards
a sectionalisation of the Main Scheme in 2016, which remains
subject to Trustee approval. In a first step, in December2015,
BAE Systems, Airbus Operations Ltd. and the scheme trustees
agreed on an allocation of the deficit of the BAE Systems Pension
Scheme (“Main Scheme”) to BAE Systems and Airbus based in
principle on each member’s last employer. This methodology is
considered to represent a better estimate of the deficit allocation
than the relative payroll contributions of active members and
has been reflected in the allocation of the IAS19 pension deficit
in the Main Scheme at 31December 2015. The impact of this
change on the amounts allocated at 31December 2015 is a
decrease of € 106million in the Group’s share of the reported
IAS19 deficit.
In the event that an employer who participates in the BAE pension
schemes fails or cannot be compelled to fulfil its obligations as
a participating employer, the remaining participating employers
are obliged to collectively take on its obligations. The Group
considers the likelihood of this event as remote.
Risks
The defined benefit obligation exposes the Group to actuarial
risks, including the following ones:
Market price risk — The return on plan assets is assumed
to be the discount rate derived from AA-rated corporate
bonds. If the actual return rate of plan assets is lower than the
applied discount rate, the net defined benefit liability increases
accordingly. Moreover, the market values of the plan assets are
subject to volatility, which also impacts the net liability.
Interest rate risk — The level of the defined benefit obligation
is significantly impacted by the applied discount rate. The
low interest rates, particular in the euro -denominated market
environment, lead to a relatively high net pension liability. If the
decline in returns of corporate bonds will continue, the defined
benefit obligation will further increase in future periods, which
can only be offset partially by the positive development of
market values of those corporate bonds included in plan assets.
Generally, the pension obligation is sensitive to movements in
the interest rate leading to volatile results in the valuation.
Inflation risk — The pension liabilities can be sensitive to
movements in the inflation rate, whereby a higher inflation rate
could lead to an increasing liability. Since some pension plans
are directly related to salaries, increases in compensations could
result in increasing pension obligations. A fixed interest rate has
been agreed for the deferred compensation plan P3, which is
financed by the employees.
Longevity risk — The pension liabilities are sensitive to the life
expectancy of its members. Rising life expectancies lead to an
increase in the valuation of the pension liability.
Financial Statements 2015
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QRegistration Document 2015
Annual Report 2015 Financial Statements 2015