Siemens 2007 Annual Report Download - page 253

Notes to Consolidated Financial Statements 253
(in millions of €, except where otherwise stated and per share amounts)
Notes to Consolidated Financial Statements
23 Pension plans and similar commitments
Pension benefi ts provided by Siemens are currently organized primarily through
defi ned benefi t pension plans which cover virtually all of the Company’s domestic
employees and many of the Company’s foreign employees. To reduce the risk
exposure to Siemens arising from its pension plans, the Company has started the
redesign of benefi t schemes from defi ned benefi t schemes towards benefi t
schemes which are predominantly based on contributions made by the Company.
In order to fund Siemens’ pension obligations, the Company’s major pension plans
are funded with assets in segregated pension entities.
Furthermore, the Company provides other post-employment benefi ts, which
primarily consist of transition payments to German employees after retirement as
well as post-employment health care and life insurance benefi ts to employees in
the U.S. and Canada. These predominantly unfunded other post-employment ben-
efi t plans qualify as defi ned benefi t plans under IFRS.
In addition to the above, the Company has foreign defi ned contribution plans
for pensions and other post-employment benefi ts or makes contributions to social
pension funds based on legal regulations (State plans). The recognition of a lia-
bility is not required because the obligation of the Company is limited to the pay-
ment of the contributions into these plans or funds.
Accounting for defi ned benefi t plans
Consolidated Balance Sheets
Defi ned benefi t plans determine the entitlements of their benefi ciaries. An
employee’s fi nal benefi t entitlement at regular retirement age may be higher than
the fi xed benefi ts at the balance sheet date due to future compensation or benefi t
increases. The net present value of this ultimate future benefi t entitlement for
service already rendered is represented by the Defi ned Benefi t Obligation (DBO),
which is actuarially calculated with consideration for future compensation
increases.
In the case of unfunded plans, the recognized pension liability is equal to the
DBO adjusted by unrecognized past service cost. In the case of funded plans, the
fair value of the plan assets is offset against the benefi t obligations. The net
amount, after adjusting for the effects of unrecognized past service cost and any
asset ceiling, is recognized as pension liability or pension asset.