I: Orígenes de la Sociedad de la Información
1.3 Nacimiento de la red
14.1. PRoVisioNs FoR PeNsioNs aNd similaR obligatioNs
Company pensions at gagfah s.a. are granted by way of both defined contribution and defined benefit plans.
Under the defined contribution plans,the Company pays contributions to public or private pension insurance schemes on the basis of statutory or contractual require- ments. gagfah s.a. does not have any other benefit obligations beyond payment of contributions. The current contribution payments are disclosed as an expense in the relevant year under personnel expenses of the functional areas.
The gagfah s.a. also managesdefinedbenefit plans for its employees. There are
various types of employer-funded pension plans for company pensions. The provi- sions are measured according to the projected unit credit method in accordance with
ias 19. The amount of the obligation is based on the present value of the earned and realistic pension entitlements on the measurement date, including probable future in- creases in pensions and salaries. The gagfah subgroup, for example, grants its em- ployees company pensions under Pension Regulation 2002 (hereinafter referred to as “vo 2002”). In addition to its own pension scheme, the nileg subgroup also participates in the pension scheme (hereinafter referred to as the “vbl”) organized by the pension in- stitution of the Federal Republic of Germany and the Federal States.
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The vbl constitutes a multi-employer defined benefit plan which pursuant to ias 19.30 (a) was accounted for as if it were a defined benefit plan as the VBL does not make avail- able sufficient information to permit treatment as a defined contribution plan.
gagfah s.a. pays old-age pensions, early retirement pensions, invalidity pensions, wid-
ow’s / widower’s and orphan’s pensions. The age limits for old-age pensions, invalidity pensions, survivor’s and orphan’s pensions are the same as those for statutory pension insurance. There is a waiting period of ten years until a vested claim can be secured.
gagfah s.a. is not aware of any specific information on any surpluses or deficits in
the plan or any future effects that such surpluses or deficits may have. However, in prior year an external appraisal has valued nileg subgroup’s insufficiently financed pension obligations at € 24.9 million. It is assumed that those obligations still exist in the reporting period. This can be regarded as indicative of current deficits in the plan. This may result in nileg subgroup having to pay higher future contribution payments to the vbl.
The following tables present an overview of the plans.
Number of Commitments
The following groups are entitled to employer-funded pension benefits:
number 12-31-2006 12-31-2005 Active employees Non-vested expectancies 423 249 Vested expectancies 589 615 1,012 864
Vested expectancies of employees no longer with the Company 160 72
Current pensions 846 849
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12-31-2006 12-31-2005
in % p. a.:
Discount rate 4.50 3.75
Salary increase, pension increase in service 2.00 2.00
Cost of living adjustment 1.00 – 2.00 2.00
Turnover 4.00 – 5.00 4.00 – 5.00
in years:
Actual retirement age
Men 63 62 or 63
Women 60 to 63 62 or 60
Special cases 60 to 63 Not before 60
The following Group-wide parameters were used to calculate the obligations:
For death and disability, the 2005G mortality tables by Prof. Dr. Klaus Heubeck were used. The salary trend accounts for the various reasons for salary increases, e. g. increases under collective wage agreements, promotions, etc.
The assumed turnover rate corresponds to the average turnover rate in Germany. Inter- nal turnover tables provided by the actuary were used to factor this into the valuation. If the actual development during the year deviates from the assumptions made at the beginning of the fiscal year or other parameters are set at the end of the fiscal year than at the beginning, (additional) actuarial gains or losses may arise.
Provisions are recognized for obligations to current and former employees from future and current benefit entitlements.
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The pension provisions developed as follows in the fiscal year:
Reconciliation of liabilities from defined benefit obligations to the recognized pension provisions:
€ million 31-12-2006 31-12-2005
Defined benefit obligations as of December 31 113.6 125.0 Unrecognized actuarial gains / losses – 4.3 – 18.6
Provisions as of december 31 109.3 106.4
€ million 2006 2005
Provisions as of January 1 106.4 91.3
Additions from the acquisition of subsidiaries / joint ventures 0.3 12.8
Pension expenses for the fiscal year 8.8 7.8
Direct pension payments – 6.2 – 5.5
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€ million 2006 2005
Obligation as of January 1 125.0 91.0
Additions from the acquisition of subsidiaries / joint ventures 0.3 12.8
Current service cost 2.5 1.7
Past service cost 0.0 1.7
Interest expense 4.8 4.4
Effect of plan amendments on DBO 1.1 0.0
Actuarial gains and losses – 13.9 18.9
Direct pension payments – 6.2 – 5.5
obligation as of december 31 113.6 125.0
The total pension expense in the consolidated income statement breaks down as follows:
€ million 2006 2005
Current service cost 2.5 1.7
Changes to the plan due to an increase of commitments 0.0 1.7
Interest expense 4.8 4.4
Effect of plan amendments on DBO 1.1 0.0
Actuarial gains (–) or losses recognized in the income statement 0.4 0.0
total 8.8 7.8
The current service cost is disclosed under general and administrative expenses (sala- ries for administrative staff) and the interest expense under interest expense (periodical). The experience adjustment on plan liabilities amounts to € 0.7 million in 2006. The expected pension expense for fiscal year 2007 amounts to € 7.1 million. The pension obligation is calculated as follows:
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€ million As of Changes within As of
January 1, the consolidated Interest December 31, Thereof non- Thereof
2006 Group Utilization Reversals Additions effect 2006 current current
Phased retirement 7.6 2.3 0.8 0.0 8.5 0.0 17.6 15.7 1.9
Warranty obligations
and latent risks 10.1 0.3 0.6 5.9 1.2 0.0 5.1 0.3 4.8
Severance payments, liti-
gation costs and similar risks 1.3 1.8 1.1 1.1 4.9 0.0 5.8 0.0 5.8
Provision for sales
commissions 2.2 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0
Provision for distribution
obligations 17.1 0.0 7.4 4.8 8.0 0.0 12.9 0.9 12
Restructuring provisions 42.7 0.0 14.4 7.4 1.5 0.0 22.4 0.0 22.4
Provision for BfA obligation 2.1 0.0 2.1 0.0 0.1 0.0 0.1 0.0 0.1
Provision for demolition
costs 0.0 11.8 0.0 0.0 0.0 0.0 11.8 10.5 1.3
Provision for restitution
proceedings 0.0 10.3 0.6 1.4 1.1 0.0 9.4 0.0 9.4
Provision for share-based
remuneration 0.0 0.0 0 0.0 3.4 0.0 3.4 3.3 0.1
Other provisions 0.3 2.3 0.2 0.1 8.3 0.0 10.6 0.0 10.6
total 83.4 28.8 29.4 20.7 37.0 0.0 99.1 30.7 68.4
14.2. otheR PRoVisioNs
The other provisions developed as follows in the fiscal year:
€ million As of Changes within As of
January 1, the consolidated Interest December 31, Thereof non- Thereof
2005 Group Utilization Reversals Additions effect 2005 current current
Phased retirement 0.0 0.9 0.2 0.0 6.9 0.0 7.6 7.6 0.0
Warranty obligations
and latent risks 3.3 2.5 0.9 2.2 7.3 0.1 10.1 1.4 8.7
Severance payments, liti-
gation costs and similar risks 0.3 0.1 0.3 0.1 1.3 0.0 1.3 0.0 1.3
Provision for sales
commissions 0.0 0.0 0.0 0.0 2.2 0.0 2.2 0.0 2.2
Provision for distribution
obligations 0.0 0.0 0.0 0.0 17.1 0.0 17.1 0.0 17.1
Restructuring provisions 0.7 0.0 3.0 0.1 45.1 0.0 42.7 0.0 42.7
Provision for BfA obligation 0.0 0.0 0.0 0.0 2.1 0.0 2.1 0.0 2.1
Other provisions 0.1 0.0 0.0 0.0 0.2 0.0 0.3 0.1 0.2
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€ million As of Changes within As of
January 1, the consolidated Interest December 31, Thereof non- Thereof
2006 Group Utilization Reversals Additions effect 2006 current current
Phased retirement 7.6 2.3 0.8 0.0 8.5 0.0 17.6 15.7 1.9
Warranty obligations
and latent risks 10.1 0.3 0.6 5.9 1.2 0.0 5.1 0.3 4.8
Severance payments, liti-
gation costs and similar risks 1.3 1.8 1.1 1.1 4.9 0.0 5.8 0.0 5.8
Provision for sales
commissions 2.2 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0
Provision for distribution
obligations 17.1 0.0 7.4 4.8 8.0 0.0 12.9 0.9 12
Restructuring provisions 42.7 0.0 14.4 7.4 1.5 0.0 22.4 0.0 22.4
Provision for BfA obligation 2.1 0.0 2.1 0.0 0.1 0.0 0.1 0.0 0.1
Provision for demolition
costs 0.0 11.8 0.0 0.0 0.0 0.0 11.8 10.5 1.3
Provision for restitution
proceedings 0.0 10.3 0.6 1.4 1.1 0.0 9.4 0.0 9.4
Provision for share-based
remuneration 0.0 0.0 0 0.0 3.4 0.0 3.4 3.3 0.1
Other provisions 0.3 2.3 0.2 0.1 8.3 0.0 10.6 0.0 10.6
total 83.4 28.8 29.4 20.7 37.0 0.0 99.1 30.7 68.4
€ million As of Changes within As of
January 1, the consolidated Interest December 31, Thereof non- Thereof
2005 Group Utilization Reversals Additions effect 2005 current current
Phased retirement 0.0 0.9 0.2 0.0 6.9 0.0 7.6 7.6 0.0
Warranty obligations
and latent risks 3.3 2.5 0.9 2.2 7.3 0.1 10.1 1.4 8.7
Severance payments, liti-
gation costs and similar risks 0.3 0.1 0.3 0.1 1.3 0.0 1.3 0.0 1.3
Provision for sales
commissions 0.0 0.0 0.0 0.0 2.2 0.0 2.2 0.0 2.2
Provision for distribution
obligations 0.0 0.0 0.0 0.0 17.1 0.0 17.1 0.0 17.1
Restructuring provisions 0.7 0.0 3.0 0.1 45.1 0.0 42.7 0.0 42.7
Provision for BfA obligation 0.0 0.0 0.0 0.0 2.1 0.0 2.1 0.0 2.1
Other provisions 0.1 0.0 0.0 0.0 0.2 0.0 0.3 0.1 0.2
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All of the provisions recognized as of the balance sheet date meet the recognition criteria of ias 37.14. Accordingly, provisions were only set up for current obligations to third parties as a result of a past event which are highly likely to lead to a future outflow of resources and whose amount can be reliably estimated.
The gagfah s.a. concluded a collective agreement (gagfah subgroup) and works
agreements (nileg and woba subgroup) respectively on phased retirement. These models allow employees above the age of 55 to make a smooth transition into retirement and ensures employment for younger employees. In the reporting period, 67 new agreements were concluded.
The favored model of phased retirement is the “block model”, whereby the phased retirement period may not be longer than six years and is spread over a work phase (first phase, full-time employment) and a release phase (second phase).
The relevant employees receive gross monthly pay based on the agreed working time pursuant to the arrangements under the collective agreement and the works agreements in place. The employees receive this pay for the entire duration of phased retirement. Capital-forming payments are granted in line with the agreed part-time work, i. e. also in the release phase.
The provisions for phased retirement totaling € 17.6 million (prior year: € 7.6 million) recognized as of December 31, 2006, are mainly classified as non-current long-term benefits.
Warranty provisions totaling € 5.1 million (prior year: € 10.1 million) were mainly set
up for known cases of liability from project business. The majority of the warranty ob- ligations are current.
The provisions forseverance payments, litigation costs and similar risks relate to estimated costs in connection with employees leaving the Company and litigation re- lating to project business. As of the balance sheet date, provisions of € 5.8 million (pri- or year: € 1.3 million) had been recognized.
The provision for distribution obligationsserves to fulfill notarized commitments to
buyers of individual apartments to renovate parts of fractionally-owned buildings.
The provision for restructuring relates to employee severance payments and other
costs related to the strategic repositioning of the subgroups. As of January 1, 2006, the provi- sion amounted to € 42.7 million. € 14.4 million thereof was used during the fiscal year. Provi- sions are allocated through restructuring expenses. The provisions are entirely current.
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The provision is mainly based on various restructuring plans which have been con- cluded for the entities in all subgroups in November and December 2005. In 2006 a restructuring plan for the woba subgroup was concluded. These plans comprise the relocation of the central commercial and administrative operations to Essen, joint customer centers to optimize real estate management and the integration and harmo- nization of the it systems. In addition, various individual agreements with employees about severance payments are covered through this provision.
The provision for BfA obligations [“BfA”: Federal Insurance Office for Salaried
Employees] covers the risk that the Company fails to let the agreed number of apart- ments to BfA employees.
The provision for demolition costs amounting to € 11.8 million was recognized for
the fulfillment of contractual obligations to demolish certain buildings within a cer- tain period of time. € 10.5 million thereof is long-term, € 1.3 short-term.
The provision for restitution proceedings amounting to € 9.4 million concerns res-
titution requirements subject to the German Act on the Clarification of Property Claims [“Vermögensgesetz”: VermG], for example, the return of properties to their former own- ers and requirements to reimburse sales proceeds or rentals generated in this connection. The provisions are entirely current.
The provision for share-based remuneration amounting to € 3.4 million results from
contractual obligations to managers.
The outflows of cash and cash equivalents from non-current provisions are largely expected within the next five years.
No major refunds are expected. No asset items have been recognized for refunds.