Mercedes 2012 Annual Report Download - page 227

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Table  7.58 shows the weighted average assumptions which
the Group used to determine net periodic pension cost.
Discount rates. The discount rates for German and non-German
pension plans are determined annually as of December 31
on the basis of high-quality corporate bonds with maturities
and values matching those of the pension payments.
Expected return on plan assets. The expected long-term
rates of return for German and non-German plan assets are
primar ily derived from the asset allocations of plan assets and
expected future returns for the various asset classes in the
portfolios. Temporary variability in the asset allocations of plan
assets does not result in adjustments of the expected long-
term rates of return. For the determination of the expected long-
term rates of return, our investment committees survey banks
and large asset portfolio managers about their expectations for
future returns for the relevant market indices. The allocation-
weighted average return expectations serve as an initial indicator
for the expected rate of return on plan assets for each
pension fund.
In addition, Daimler considers long-term actual plan assets’
results and historical market returns in its evaluation in order
to reflect the long-term character of the plan assets.
Multi-employer plans. Daimler participates in some collectively
bargained defined benefit pension plans maintained by more
than one employer. The Group accounts for several of these
plans in its consolidated financial statements as defined contri-
bution plans because the information required to use defined
benefit accounting is not available in a timely manner and in suf-
ficient detail. The Group cannot exercise direct control over
such plans and the plan-trustees have no legal obligation to share
information directly with participating employers. Higher
contributions by the Group to such a pension plan could result
in particular when an underfunded status exceeds a specific
level.
Net periodic pension cost. The components of net periodic
pension cost included in the consolidated statement of income
are presented in table  7.59.
Table  7.60 presents the line items within the consolidated
statement of income in which the net periodic pension cost
are included.
Expected payments. In 2013, at present Daimler expects
to make cash contributions of €0.6 billion to its pension plans;
the fixing of the final height is usually in the fourth Quarter
of a financial year. In addition, the Group expects to make pen-
sion benefit payments of €0.1 billion under pension benefit
schemes without plan assets in 2013.
23. Provisions for other risks
The development of provisions for other risks is summarized
in table  7.61.
Product warranties. Daimler issues various types of product
warranties, under which it generally guarantees the perfor-
mance of products delivered and services rendered for a certain
period. The provision for these product warranties covers
expected costs for legal and contractual warranty claims, as
well as expected costs for policy coverage, recall campaigns
and buyback commitments. The provision for buyback commit-
ments represents the expected costs related to the Group’s
obligation, under certain conditions, to repurchase a vehicle
from a customer. Buybacks may occur for a number of reasons
including litigation, compliance with laws and regulations in
a particular region and customer satisfaction issues. The utiliza-
tion date of product warranties depends on the incidence
of the warranty claims and can span the entire term of the prod-
uct warranties. The cash outflow for non-current product
warranties is principally expected within a period until 2015.
Personnel and social costs. Provisions for personnel and
social costs primarily comprise expected expenses of the Group
for employee anniversary bonuses, profit sharing arrange-
ments and management bonuses, as well as early retirement
and partial retirement plans. The additions recorded to the
provisions for profit sharing and management bonuses in the
reporting year usually result in cash outflows in the following
year. The expected maturity of non-current provisions for
personnel and social costs is primarily a period of more than
5 years.
Other. Provisions for other risks include obligations for expected
reductions in revenue already recognized such as bonuses,
discounts and other price reduction commitments. They also
include expected costs in connection with liability and litiga-
tion risks, provisions for optimization programs, obligations under
the EU End-of-Life Vehicles Directive and environmental pro-
tection risks, as well as provisions for other taxes and various
other risks.
Further information on other provisions for other risks
is provided in Notes 5 and 28.