Philips 2015 Annual Report Download - page 147

20 Group nancial statements 12.9
Annual Report 2015 147
Other provisions
Philips Group
Other provisions in millions of EUR
2013 - 2015
2013 2014 2015
Balance as of January 1 529 519 575
Changes:
Additions 198 213 198
Utilizations (224) (153) (186)
Releases (48) (37) (35)
Reclassication 80 17 14
Liabilities directly associated with
assets held for sale (3) (13) (1)
Accretion - 6 7
Changes in consolidation (1) (1) 24
Translation dierences (12) 24 8
Balance as of December 31 519 575 604
The main elements of other provisions are: provision for
post-employment benets and obligatory severance
payments of EUR 47 million (2014: 50 million), onerous
contract provisions for unfavorable supply contracts as
part of divestment transactions, onerous (sub)lease
contracts and expected losses on existing projects /
orders totaling EUR 106 million (2014: 103 million),
provision for employee jubilee funds EUR 71 million
(2014: EUR 74 million), self-insurance liabilities of EUR
70 million (2014: EUR 65 million), provisions for rights of
return of EUR 52 million (2014: EUR 52 million),
provision for possible taxes/social security of EUR 99
million (2014: EUR 97 million) and provision for
decommissioning costs of EUR 52 million (2014: EUR 36
million).
Provisions of EUR 24 million have been assumed as a
result of the acquisition of Volcano.
The provision for self-insurance liabilities is expected
to be used within the next ve years. More than half of
the provision for possible taxes/social security and
provision for decommissioning costs and less than half
of the provision for employee jubilee funds is expected
to be utilized within next ve years. All other provisions
are expected to be utilized mainly within the next three
years, except for provision for rights of return, which the
Company expects to use within the next year.
20 Post-employment benets
Employee post-employment plans have been
established in many countries in accordance with the
legal requirements, customs and the local practice in
the countries involved.
Most employees that take part in a Company pension
plan are covered by dened contribution (DC) pension
plans. The Company also sponsors a number of dened
benet pension plans. The benets provided by these
plans are based on employees’ years of service and
compensation levels. The Company also sponsors a
limited number of dened benet retiree medical plans.
The benets provided by these plans are typically
covering a part of the healthcare insurance costs after
retirement.
The largest dened benet pension plans are in:
• The Netherlands (settled per May 1, 2015),
• The United Kingdom (UK) (settled per December 31,
2015) and
• The United States (US)
At the start of 2015 these plans accounted for more than
90% of the total dened benet obligation and plan
assets. Philips is one of the sponsors of Philips
Pensionskasse VVaG in Germany, which is a multi-
employer plan and is accounted for as a DC plan.
The Netherlands
For the pension plan in the Netherlands (the Flexplan)
the Company has no other nancial obligation to the
Pension Fund than to pay an agreed xed contribution
for the annual accrual of active members. The
pensionable age is 67 year. The Flexplan is executed by
a Company Pension Fund. A mandatory cap imposed
by Dutch legislation of EUR 100 thousand applies on
the pension salary for future pension accrual.
Employees earning more than this cap receive a wage
allowance and can join a voluntary net pension saving
scheme, at their own expense, for the salary part above
the cap. The net pension saving scheme and some
related risk insurances are executed by an external
provider other than the Company Pension Fund.
Up to May 2015, the Company accounted for the
Flexplan as a dened benet (DB) pension plan as it still
ran actuarial and investments risks by means of being
entitled to a discount arrangement. This discount
arrangement would result in potential future variable
pension contributions to be paid by the Company.
Beginning of May 2015, the Company surrendered its
right to future discounts and as a result the plan
qualied as a dened contribution plan. Reason for
surrendering the discount arrangement was a
signicant reduction in 2015 of the outlook for a
potential discount due to increased pension
obligations and a regulatory decit at the fund (because
of a lower regulatory discount rate and higher solvency
buers due to change in investment strategy),
combined with the need to avoid unwanted complexity
of an allocation of the Dutch fund as a DB plan as part
of the separation. Consequently, the plan was classied
as a DC plan. This triggered the accounting settlement
of the plan which at the time had a EUR 20 million
surplus. As the surplus was not recognized in the
balance sheet due to the asset ceiling test, and because
no further payments were made directly related to the
settlement, as per the Company’s accounting policy the
Company did not recognize a settlement result in the
income statement but in remeasurements for pensions
in the Consolidated statements of Comprehensive
Income.