Peachtree 2015 Annual Report Download - page 137

The Sage Group plc | Annual Report & Accounts 2015 135
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
Accounting policy
Obligations under defined contribution schemes are recognised as an operating cost in the income statement as incurred.
The Group also operates a small defined benefit pension scheme in Switzerland and other post-employment benefit schemes in France.
The assets of these schemes are held separately from the assets of the Group. Under French legislation, the Group is required to make
one-off payments to employees in France who reach retirement age while still in employment. The costs of providing benefits under
these schemes are determined using the projected unit credit actuarial valuation method.
The current service cost and gains and losses on settlements and curtailments are included in selling and administrative expenses
in the income statement. Past service costs should be recognised on the earlier of the date of the plan amendment and the date the
Group recognises restructuring-related costs. Interest on the pension plan assets and the imputed interest on pension plan liabilities
are included within selling and administrative expenses in the income statement.
Changes in the post-employment benefit obligation due to experience and changes in actuarial assumptions are included in the
statement of comprehensive income in full in the period in which they arise.
The liability recognised in the balance sheet in respect of the defined benefit pension scheme is the present value of the defined
benefit obligation and future administration costs at the end of the reporting period, less the fair value of plan assets. The defined
benefit obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is determined
by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the
currency in which the benefits will be paid and that have terms to maturity approximate to the terms of the related pension liability.
The calculation of the defined benefit obligation of a defined benefit plan requires estimation of future events, for example salary and
pension increases, inflation and mortality rates. In the event that future experience does not bear out the estimates made in previous
years, an adjustment will be made to the plan’s defined benefit obligation in future periods which could have a material effect on
the Group.
A sensitivity analysis has been performed on the significant assumptions. The relevant assumptions are deemed to be the discount
rate and salary increases, as these are most likely to have a material impact on the defined benefit obligations. The analysis has been
performed by the independent actuaries.
Pension costs included in the consolidated income statement Note
2015
£m
2014
£m
Defined contribution schemes 9.8 9.0
Defined benefit plans 2.0 2.0
3.3 11.8 11.0
Defined benefit plans
The most recent actuarial valuations of the post-employment benefit plans were performed by KPMG (France) and PwC (Switzerland)
in October 2015 for the year ended 30 September 2015.
Weighted average principal assumptions made by the actuaries
2015
%
2014
%
Rate of increase in pensionable salaries 2.02 2.13
Discount rate 1.12 1.70
Inflation assumption 2.02 2.00
Mortality rate assumptions made by the actuaries
2015
years
2014
years
Average life expectancy for 65-year-old male 22.2 22.2
Average life expectancy for 65-year-old female 24.5 24.5
Average life expectancy for 45-year-old male 42.5 42.4
Average life expectancy for 45-year-old female 45.0 45.0