9.19 Severance pay and other employee liabilities
The amount and the changes in the severance pay provision and the defi ned-benefi t pension plans are reported below:
(EUR 000) 31.12.2008 31.12.2007
Severance pay provision 23,043 22,463
Defi ned-benefi t pension plans 8,269 8,010
Other provisions for personnel 193 841
Total 31,505 31,314
Severance pay obligations Defi ned-benefi t plans
(EUR 000) 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Present value of obligations 23,043 22,463 8,462 8,851
Fair value of the plan’s assets - - - -
Unrecognised actuarial gains/(losses) - - - -
Total 23,043 22,463 8,462 8,851
(EUR 000)
Severance
pay provision benefi t plansDefi ned-
Balance at 31 December 2007 22,463 8,851
Change in the scope of consolidation - -
Costs for the period 802 724
Contributions paid (1,932) (229)
Other movements (2) (648)
Actuarial (gains)/losses in equity 1,712 (236)
Balance at 31 December 2008 23,043 8,462
The amount recognised in the income statement breaks down as follows:
Severance pay provision Defi ned-benefi t plans
(EUR 000) 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Costs for services 126 258 96 (110)
Interest costs 676 858 383 417
Actuarial (gains)/losses recognised during the period 1,712 - (236) -
Total 2,514 1,116 243 307
The main actuarial assumptions are as follows:
Severance pay provision Defi ned-benefi ts plans
(EUR 000) 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Discount rate (annual) 6.60% 4.2% - 4.28% 6.64% 4.04% - 4.8%
Rate of salary increases 5% - 6% 2.6% - 5.4% 2.82% - 4.15% 2% - 2.5%
Rate of turnover 2.3% - 6.12% 1.9% - 3.88% 0.65% - 4.29% -
The severance pay provision (trattamento di fi ne rapporto) in Italy calls for the payment of the entitlement accumulated by employees until the time they leave the company under Art. 2120 of the Italian Civil Code. Law no. 296 of 27 December 2006 (“2007 Finance Law”) and subsequent Decrees and Regulations issued in early 2007, as part of the reform of the supplementary pension system, signifi cantly changed the working of this institute, providing for (in case of companies with more than 50 employees) the transfer of the severance pay accrued after the date of the Reform to the supplementary pension schemes or to the treasury fund managed by INPS.
In line with the recognition of this effect, the Group decided to modify the recognition criteria for actuarial gains/losses, as largely explained in paragraph 7.3 “Employee benefi ts”, thus abandoning the corridor method under which actuarial gains/losses were recognised in the income statement in compliance with the specifi c regulations and over a longer period in favour of the equity method under which the actuarial components are recognised directly and entirely in shareholders’ equity, net of the related deferred tax effect. In reviewing the overall treatment of defi ned-benefi t plans, changes were also made to the criteria for presenting interest costs, which have been no longer recognised under cost of labour, but rather under fi nancial costs since 1 January 2006. As provided by IAS 8 “Accounting policies, changes in accounting estimates and errors”, the Group has applied the method retrospectively, also modifying the comparative data presented.
9.20 Other current and non-current liabilities
31.12.2008 31.12.2007
(EUR 000) Current Non-current Current Non-current
Due to employees 29,608 4,583 25,915 3,979
Deferred income 1,816 - 1,689 -
Payables for indirect taxes and other amounts due to tax authorities 11,039 - 9,342 -
Payables to social security institutions 14,318 - 13,476 -
Other payables to other third parties 20,471 4,019 23,878 5,248
Total other liabilities to third parties 77,252 8,602 74,300 9,227
Other liabilities to related parties 3,979 - 4,805 -
Total 81,231 8,602 79,105 9,227
Other current and non-current liabilities towards third parties came to EUR 85,854 thousand, an increase of EUR 2,327 thousand (EUR 83,527 thousand at 31 December 2007). This change is mainly ascribable to:
• an increase of “due to employees” for EUR 4,297 thousand, chiefl y attributable to the Signalling Business Unit for EUR 2,830 thousand; • the consequent increase of payables to social security institutions for EUR 842 thousand;
• the increases in payables for indirect taxes for EUR 1,697 thousand (attributable for EUR 1,529 thousand to the Signalling Business Unit, for EUR 97 thousand to the Transport Systems Business Unit and for EUR 71 thousand to the Parent company Ansaldo STS SpA); • the decrease in other payables for EUR 4,636 thousand mainly generated by the Signalling Business Unit.
9.21 Trade payables
(EUR 000) 31.12.2008 31.12.2007
Due to suppliers 189,978 174,725
Total due to suppliers 189,978 174,725
Due to related parties 23,523 19,785
Total 213,501 194,510
Trade payables to third parties decreased by EUR 15,253 thousand; this change is mainly attributable to the Transport Systems Business Unit and is due to an increase in production obtained in the course of the fi nancial year.
Trade payables to related parties increased by EUR 3,738 thousand also referable to the Transport Systems Business Unit due to greater production achieved in the year.
9.22 Derivatives
The table below details the asset and liability positions related to derivative instruments.
31.12.2008 31.12.2007
(EUR 000) Assets Assets Attivi Liabilities
Trading - 72 - -
Fair Value Hedge 773 412 - 95
Cash Flow Hedge 7,149 267 211 9,887
Instruments to hedge exchange rate risk 7,922 751 211 9,982
Derivatives
Derivative assets showed an increase of EUR 7,711 thousand while derivative liabilities recorded a decrease of EUR 9,231 thousand. These changes are mainly attributable to the Signalling Business Unit and in particular to the American subsidiary Ansaldo STS USA Inc. as a result of the variation in the fair value, which turns from negative to positive because of the fl uctuations in exchange rates (€ / USD).
Determination of fair value
At 31 December 2008, the Ansaldo STS Group did not hold listed derivative instruments. The fair value of non-listed derivative
instruments is measured with reference to the fi nancial valuation techniques. Specifi cally, the fair value of exchange rate futures contracts is calculated based on the market exchange rate at the reference date and the rate differentials between the relevant currencies. The fair value of swaps is calculated by discounting future cash fl ows using market parameters.
Hedging transactions are carried out predominantly with the banking system. At 31 December 2008, the Group had contracts referring to various currencies in the following notional amounts:
(EUR 000) 31.12.2008 31.12.2007 Euro 169,924 102,683 US dollar 68,660 69,653 GBP 5,788 7,109 Swedish krona 5,415 41,510 Canadian dollar 10,985 23,016 Australian dollar 34,072 35,262
Hong Kong dollar 288 0
The Group, though exposed to the risk linked to the trend of interest rates, does not make use of policies to hedge the risk connected with the rate variability.
9.23 Guarantees and other commitments
LeaseThe Group holds a number of operating leases for the purposes of acquiring the use of property, plant and equipment. The minimum future payments are as follows:
(EUR 000) Leasing operativi Leasing fi nanziari
Within 1 year 7,945 8
2 to 5 years 12,170 -
More than 5 years 6,766 -
26,881 8
Guarantees
At 31 December 2008, the Group had the following outstanding guarantees: Direct guarantees and indemnities issued by third parties on behalf of the Group in favour of customers and other third parties
(EUR 000)
Signalling Business Unit
Transport Systems
Business Unit Total Unsecured guarantees issued by Finmeccanica (Parent Company Guarantees)
and Finmeccanica Finance SA (advance payment bonds, performance bonds,
retention money bonds) in favour of customers for commercial transactions 1.866,5 78.331,7 80.198,2 Unsecured guarantees issued by Ansaldo STS and Ansaldo Signal NV
in liquidation (Parent Company Guarantees), in favour of customers
for commercial transactions 112.157,2 1.377,8 113.535,0
Sureties and bonds (advance payment bonds, performance bonds, bid bonds, retention bonds) issued by credit institutions or insurance companies in favour
of customers for commercial transactions 441.423,1 528.129,7 969.552,8 of which: counter-guaranteed by Finmeccanica 18.321,5 154.289,6 172.611,1 of which: counter-guaranteed by Ansaldo STS 136.396,2 68.893,9 205.290,1 Direct guarantees and indemnities by Finmeccanica and Ansaldo STS,
credit institutions or insurance companies in favour of other third parties
for non-contractual/commercial guarantees (fi nancial, fi scal transaction) 40.932,1 7.973,2 48.905,3 of which: issued or counter-guaranteed by Finmeccanica 3.106,5 7.973,2 11.079,7 of which: issued or counter-guaranteed by Ansaldo STS 37.825,6 0,0 37.825,6