APC 2003 Annual Report Download - page 91

Note 16. Provisions for
pensions and other post-retirement
benefit obligations
The Group has set up pension, life insurance, length-
of-service award and other post-retirement benefit
plans for its employees. These range from plans pro-
viding for the payment of a lump sum based on years
of service to supplementary pension plans and other
multi-employer plans.
Payments made under defined contribution plans are
recorded in the income statement, under operating
expense, in the year of payment and are in full set-
tlement of the Group’s liability.
The Group’s obligation for the payment of length-of-
service awards mainly concerns French companies
in the Group and is generally calculated based on
the seniority, grade and end-of-career salary of the
employees concerned.
For defined benefit plans, the accrued or prepaid
periodic pension cost is determined using the pro-
jected unit credit method and is recognized in accor-
dance with local accounting standards and tax rules
in the countries concerned. Where necessary, these
amounts are adjusted to comply with Group account-
ing policies.
Actuarial valuations are performed each year for the
main plans and at regular intervals for the other
plans. The assumptions used vary according to the
economic conditions prevailing in the country con-
cerned. Benefit obligations under defined benefit
plans mainly concern the Group’s North American
subsidiaries and are funded through payments to
external funds. The majority of plan assets are
invested in equities and bonds not issued by the
Group and, occasionally, in real estate.
16.1 - Provisions for pensions and
length-of-service awards
Annual changes in obligations, the market value of
investments and related assets and liabilities are
reflected in the consolidated balance sheet as fol-
lows:
89
( € millions) O/w US plans O/w US plans
Dec. 31, 2003 Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2002
1. Amounts recognized in the accounts
Other non-current assets 315.6
295.2 274.4 236.9
Deferred taxes 6.6 140.2 128.2
Provisions for pensions and
other post-retirement benefit obligations (407.5)
(13.3) (521.6) (160.1)
A mounts recognized in the balance sheet (85.3) 281.9 (107.0) 205.0
Comments on amounts recorded in the accounts of US subsidiaries:
In 2002, due to the sharp fall in the stock market indexes used as the benchmark for the majority of plan assets, the funded
status of the plans was determined based on the accumulated benefit obligation instead of the projected benefit obligation,
as was the case in the past. This led to the recognition of an additional minimum liability corresponding to the difference
between the fair market value of the plan assets and the accumulated benefit obligation at December 31, 2002.
Since the additional minimum liability was due to the deferral of actuarial losses and unrecognized prior service costs, an
equivalent amount, net of deferred taxes, was recorded on the assets side of the balance sheet under “Other non-current
assets” in the amount of
€ 236.9 million net of deferred taxes.
In 2003, the Group paid an additional
€ 143.3 million contribution to its US plans. As a result of this contribution and
the improved yield on plan assets, plan assets once again represented more than the accumulated benefit obligation.
The Group therefore wrote off the amount recorded under "Other non-current assets" in 2002 and reduced provisions for
pensions and other post-retirement benefits by the same amount, net of the deferred tax asset.