Saab 2015 Annual Report Download - page 102

FINANCIAL INFORMATION – FINANCIAL STATEMENTS
NOTE 34 POST-EMPLOYMENT BENEFITS
The Saab Group’s post-employment benefits refers to pensions. These pensions
comprise both defined-contribution and defined-benefit plans. A defined-contribu-
tion plan is a pension plan according to which the Group pays fixed fees to a sepa-
rate legal entity that assumes the obligations to employees. Other pension plans
are defined-benefit and refer to pension obligations that are retained by the Group,
secured through its own pension funds or through insurance.
ACCOUNTING PRINCIPLES GROUP
Defined-contribution plans
Obligations for fees to defined-contribution plans are expensed through the
income statement.
Defined-benefit plans
Saab has around ten different types of defined-benefit plans. Defined-benefit
plans mainly relate to the Swedish operations, where the ITP2 plan accounts for
91per cent (91) of the total obligation.
The Group’s net obligation for defined-benefit plans is calculated separately for
each plan by estimating the future compensation that employees have earned
through employment in present and previous periods. This compensation is dis-
counted to present value. Most of the liability is met through provisions to a pen-
sion fund. The net obligation on the closing day is estimated as the net of the fair
value of the fund assets and the present value of the pension liability.
The discount rate to estimate the obligation at present value is based on the
interest rate on the closing day for a first-class mortgage bond with a maturity
corresponding to the pension obligation. The calculation is made by qualified
actuaries using the Projected Unit Credit Method.
When the compensation terms in a plan are improved, the portion of the
increased compensation attributable to the employees’ service in previous peri-
ods is expensed through the income statement.
If the obligation calculated on the closing day deviates from the estimated obli-
gation, actuarial gains or losses arise and are recognised directly in other com-
prehensive income. The same interest rate is used to calculate financial income
on assets under management as to discount pension liabilities.
If pension obligations are lower than assets under management, this amount is
recognised as an asset.
When there is a difference between how the pension cost is determined for a
legal entity and for the Group, a liability or receivable is recognised for the special
employer’s contribution based on this difference.
The following tables provide information on defined-benefit pension plans.
Sweden
The predominant plan in Sweden is the ITP plan under collective agreements bet-
ween the Confederation of Swedish Enterprise and the Negotiation Cartel for Sala-
ried Employees in the Private Business Sector (PTK). The ITP2 plan, which is based
on an employee’s final salary, covers individuals born 1978 and before and is a
defined-benefit plan, while the ITP1 plan is a defined-contribution plan and covers
individuals born 1979 and after.
Saab’s defined-benefit pension plans in Sweden are secured either through
transfers to the Group’s own pension fund, as liabilities in the balance sheet or are
funded through insurance mainly with Alecta. The Saab Pension Fund, which
secures part of the ITP2 plan, had assets of MSEK 5,316 (5,091) as of 31 Decem-
ber 2015, compared to an obligation of MSEK 7,019 (7,428), calculated according
to IAS 19, which means that the solvency margin amounted to 76 per cent (69).
The following applies to the portion of the defined-benefit pension obligation for
retirement and family pensions secured through insurance with Alecta. According
to a pronouncement by the Swedish Financial Reporting Board, this is a defined-
benefit plan for multiple employers. Alecta is unable to provide the information that
would allow Saab to report these obligations as a defined-benefit plan, owing to
which they are reported as a defined-contribution plan. All newly earned pensions
are secured through the pension fund solution. As a result, no additional premiums
are paid to Alecta.
The collective funding ratio is calculated as the market value of Alecta’s assets as
a percentage of the insurance obligations calculated according to Alecta’s actuarial
methods and assumptions, which differ from IAS 19. The collective funding ratio is
normally permitted to range between 125 and 155 per cent. At year-end 2015,
Alecta’s surplus in the form of the collective funding ratio was 153 per cent (143).
USA
The US has a defined-benefit plan for certain employees and a supplementary plan
for individuals in executive positions. The plans are company-specific according to
an agreement in 1986 between the employees and the company and include reti-
rement and survivor’s pensions. The pension is not vested during the first five years
of employment, and the retirement age is 65. Payments corresponding to accrued
pensions are made yearly to an external trustee to cover the obligation.
Switzerland
Switzerland has a defined-benefit plan that includes all employees and where mini-
mum benefits are prescribed by law. The company is affiliated with a collective
foundation for the purpose of insuring its employees’ retirement and survivor’s pen-
sion, and payments are made annually. Provisions for pensions are made by both
employer and employees. The employee may elect to receive the full pension as a
lump sum at retirement.
Other countries
The pension plans in other countries are of insignificant amounts and are therefore
reported together with Sweden below.
Disclosures regarding defined-benefit plans
31-12-2015 Group
MSEK Sweden USA Switzerland Total
Wholly or partially funded obligations
Present value of defined-benefit
obligations 7,297 288 157 7,742
Fair value of assets under management -5,368 -337 -144 -5,849
Present value of net obligation 1,929 -49 13 1,893
Share funded 74% 117% 92% 76%
Average duration of pension obligation 18 12 16
The net amount and the special
employer’s contribution is reported in
the following items in the statement of
financial position
Provisions for pensions 1,929 - 13 1,942
Provisions for pensions related to
special employer’s contribution 431 - - 431
Long-term receivables - 49 - 49
31-12-2014 Group
MSEK Sweden USA Switzerland Total
Wholly or partially funded obligations
Present value of defined-benefit
obligations 7,730 291 132 8,153
Fair value of assets under management -5,154 -350 -121 -5,625
Present value of net obligation 2,576 -59 11 2,528
Share funded 67% 120% 92% 69%
Average duration of pension obligation 19 11 17
The net amount and the special
employer’s contribution is reported in
the following items in the statement of
financial position
Provisions for pensions 2,576 - 11 2,587
Provisions for pensions related to
special employer’s contribution 562 - - 562
Long-term receivables - 59 - 59
98 – SAAB ANNUAL REPORT 2015