13.1. Pension Provisions Company pensions at GAGFAH GROUPare granted both by way of defined contribution and defined benefit plans. Provisions are recognized for obligations to current and former employees from future and current benefit entitlements. For a detailed description on these plans, please refer to section C.10. “Pension Provisions”.
The following groups are entitled to employer-funded pension benefits:
Number of Commitments 12-31-2013 12-31-2014
Active employees
Vested expectancies 673 644
Non-vested expectancies 21 16
694 660
Vested expectancies of employees
no longer with the Company 355 370
Current pensions 851 842
Total 1,900 1,872
The following Group-wide actuarial assumptions were used to calculate the obligations:
in % p.a. 12-31-2013 12-31-2014
Discount rate 3.50 2.15
Turnover rate 4.50 4.50
Future salary increases 2.50 2.50
Future inflation rate 2.00 1.50
Future pension increases 2.00 1.50
in years
Average longevity for current pensioners
Males 20.5 21.1
Females 24.8 25.4
Average longevity for current employees (future pensioners)
Males 23.3 23.9
Females 27.4 28.0
CONSOLIDATED FINANCIAL STATEMENTS NOTES OTHER 187
GAGFAH S.A. CONSOLIDATED ANNUAL REPORT 2014
96 A. General Information
103 B. Consolidated Group and Consolidation Principles 114 C. Accounting Policies
144 D. Group Segment Reporting
148 E. Notes to the Consolidated Statement of Financial Position
209 F. Notes to the Consolidated Statement of Comprehensive Income 227 G. Notes to the Consolidated Statement of Cash Flows 229 H. Other Notes
Increases and decreases in discount rate, future salary increases, future pension increases and longevity have effects on the determination of the defined benefit obligation that have not the same absolute amount (mainly due to the compound interest effect in the calculation of the present value). If several assumptions are changed at the same time, the total effect of these changes needs not necessarily to correspond to the sum of the individual effects due to the changes in assumptions.
The significant changes in discount rate, future inflation rate and future pension increases correspond to the actual facts and the expectations for the near future. Due to the low interest rate, inflation rate and expected pension increases are on a low level as well, in the foreseeable future, an increase is not to be expected.
The calculation is based on a flexible retirement age in the German pension insurance.
The adjusted 2005G mortality tables (with adjustment 2011) by Prof. Dr. Klaus Heubeck were used for death and disability.
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. Internal 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 financial year or if parameters are set at the end of thefinancial year that differ from those set at the beginning, actuarial gains or losses arise.
In the financial year 2014 and the prior year, there were no plan amendments, curtailments and settlements.
As the requirements for plan assets specified in IAS 19.8 are fulfilled, the net defined benefit liability as shown in the Consolidated Statement of Financial Position is calculated as the balance of the defined benefit obligation and the fair value of plan assets:
€ million 12-31-2013 12-31-2014
Defined benefit obligation 132.3 152.4
Less fair value of plan assets -4.6 -4.6
Net defined benefit liability 127.7 147.8
The defined benefit obligation developed as follows:
188 WHERE LIFE HAPPENS SHAREHOLDER INFORMATION DIRECTORS’ REPORT
€ million 12-31-2013 12-31-2014
Defined benefit obligation as of
January 1 131.3 132.3
Current service cost 2.2 2.2
Interest expense 4.6 4.5
Remeasurements: Actuarial gains (-) or losses (+) from changes in
financial assumptions 1.8 21.5
Remeasurements: Actuarial gains (-) or losses (+) from experience
adjustments -0.7 -1.3
Direct pension payments -6.9 -6.8
Defined benefit obligation as of
December 31 132.3 152.4
The increase in actuarial losses from changes in financial assumptions compared to the prior year mainly results from the decrease of the discount rate from 3.50 % to 2.15 %.
The calculation of the defined benefit obligation is sensitive to the actuarial assumptions set out above. The following table summarizes how the impact on the defined benefit obligation at the end of the reporting period would have increased (+) /decreased (-) as a result of a change in significant assumptions:
Defined benefit obligation 12-31-2013 12-31-2014
0.5 % increase 0.5 % decrease 0.5 % increase 0.5 % decrease
Effects in € million
Discount rate -8.8 +9.9 -11.3 +12.9
Future salary increases +0.4 -0.4 +0.5 -0.5
0.25 % increase 0.25 % decrease 0.25 % increase 0.25 % decrease
Future pension increases +3.3 -3.2 +4.0 -3.8
1 year increase 1 year increase
Longevity +6.7 +8.2
The change in the other actuarial assumptions would not lead to a comparable high impact on the defined benefit obligation. The above sensitivities are based on the defined benefit obligation as of December 31, 2014 and December 31, 2013, and are applied to adjust the defined benefit obligation at the end of the reporting period for the assumptions concerned.
CONSOLIDATED FINANCIAL STATEMENTS NOTES OTHER 189
GAGFAH S.A. CONSOLIDATED ANNUAL REPORT 2014
96 A. General Information
103 B. Consolidated Group and Consolidation Principles 114 C. Accounting Policies
144 D. Group Segment Reporting
148 E. Notes to the Consolidated Statement of Financial Position
209 F. Notes to the Consolidated Statement of Comprehensive Income 227 G. Notes to the Consolidated Statement of Cash Flows 229 H. Other Notes
GAGFAH GROUP concluded reinsurance policies to hedge a part of the pension obligations. They are similar to life insurances including specified performance and profit participation and are measured at fair value equaling to the present value of the related obligations.
Plan assets exclusively consist of the aforementioned reinsurance policies. The movements in the fair value of these plan assets were as follows:
€ million 2013 2014
Fair value of plan assets as of
January 1 4.5 4.6
Interest income on plan assets 0.2 0.1
Benefits paid -0.1 -0.1
Fair value of plan assets as of
December 31 4.6 4.6
The net pension expenses recognized in the Consolidated Statement of Comprehensive Income break down as follows:
€ million 2013 2014
Current service cost 2.2 2.2
(Net) Interest expense 4.4 4.4
Net pension expenses 6.6 6.6
Current service cost recognized in the Consolidated Statement of Comprehensive Income are disclosed under personnel expenses that are allocated to various categories of expenses according to the cost of sales method. Interest cost is disclosed under interest expenses.
As in the prior year, there are no expected contributions to the plan for the financial year 2015. The weighted average duration of the defined benefit obligation as of December 31, 2014, is 16.2 years (prior year: 14.6 years).
190 WHERE LIFE HAPPENS SHAREHOLDER INFORMATION DIRECTORS’ REPORT
The distribution of the timing of benefit payments is as follows: • in 2015 € 6.7 million • in 2016 € 6.8 million • in 2017 € 6.7 million • in 2018 € 6.7 million • in 2019 € 6.7 million
• from 2020 until 2024 (inclusive) € 33.3 million
CONSOLIDATED FINANCIAL STATEMENTS NOTES OTHER 191
GAGFAH S.A. CONSOLIDATED ANNUAL REPORT 2014
96 A. General Information
103 B. Consolidated Group and Consolidation Principles 114 C. Accounting Policies
144 D. Group Segment Reporting
148 E. Notes to the Consolidated Statement of Financial Position
209 F. Notes to the Consolidated Statement of Comprehensive Income 227 G. Notes to the Consolidated Statement of Cash Flows 229 H. Other Notes
13.2. OTHER PROVISIONS
The other provisions developed as follows in the financial year:
€ million As of January 1, 2014 Changes within the consolidated group Utilization
Reorganization and restructuring provisions 7.4 0.0 -3.0
Provisions for costs concerning sold properties 6.2 0.0 -1.3
Provisions for severance payments, litigation costs and similar risks 4.6 0.0 -1.9
Provisions for refinancing 4.5 0.0 -2.4
Provision for restitution proceedings 4.0 0.0 -0.2
Provisions for phased retirement 3.4 0.0 -1.9
Warranty obligations and latent risks 3.3 0.0 0.0
Provision for demolition costs 0.1 0.0 -0.1
Provision for distribution obligations 0.1 0.0 0.0
Other provisions 9.7 0,6 -1.8 Total 43.3 0.6 -12.6 € million As of January 1, 2013 Changes within the consolidated group Utilization
Reorganization and restructuring provisions 6.8 0.0 -1.8
Provisions for costs concerning sold properties 7.9 0.0 -0.6
Provisions for severance payments, litigation costs and similar risks 4.3 0.0 -0.8
Provisions for refinancing 2.9 0.0 -2.5
Provision for restitution proceedings 4.4 0.0 0.0
Provisions for phased retirement 5.3 0.0 -2.3
Warranty obligations and latent risks 3.4 0.0 -0.1
Provision for demolition costs 0.2 0.0 -0.1
Provision for distribution obligations 0.2 0.0 -0.1
Provisions in connection with WOBA lawsuits 0.4 0.0 0.0
Other provisions 9.2 0.0 -2.6
Total 45.0 0.0 -10.9
192 WHERE LIFE HAPPENS SHAREHOLDER INFORMATION DIRECTORS’ REPORT
Reversals Additions Reclassifications
As of December 31, 2014
Thereof
non-current Thereof current
-0.8 21.5 0.0 25.1 2.0 23.1 -2.1 0.6 0.0 3.4 0.0 3.4 -1.8 1.6 0.0 2.5 0.0 2.5 -2.0 0.5 0.0 0.6 0.0 0.6 0.0 0.0 0.0 3.8 0.0 3.8 0.0 0.1 0.0 1.6 0.6 1.0 -0.1 0.0 0.0 3.2 0.0 3.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.2 0.0 0.2 -2.3 9.3 0.0 15.5 4.3 11.2 -9.1 33.7 0.0 55.9 6.9 49.0
Reversals Additions Reclassifications
As of December 31, 2013
Thereof
non-current Thereof current
0.0 2.4 0.0 7.4 3.4 4.0 -1.9 0.8 0.0 6.2 0.0 6.2 -0.4 1.5 0.0 4.6 0.0 4.6 -0.4 4.5 0.0 4.5 0.0 4.5 -0.4 0.0 0.0 4.0 0.0 4.0 0.0 0.4 0.0 3.4 1.5 1.9 0.0 0.0 0.0 3.3 0.0 3.3 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.1 0.0 0.1 -0.4 0.0 0.0 0.0 0.0 0.0 -0.7 3.8 0.0 9.7 3.3 6.4 -4.2 13.4 0.0 43.3 8.2 35.1
CONSOLIDATED FINANCIAL STATEMENTS NOTES OTHER 193
GAGFAH S.A. CONSOLIDATED ANNUAL REPORT 2014
96 A. General Information
103 B. Consolidated Group and Consolidation Principles 114 C. Accounting Policies
144 D. Group Segment Reporting
148 E. Notes to the Consolidated Statement of Financial Position
209 F. Notes to the Consolidated Statement of Comprehensive Income 227 G. Notes to the Consolidated Statement of Cash Flows 229 H. Other Notes
As of December 31, 2014, the reorganization and restructuring provisions amounted to € 25.1 million (prior year: € 7.4 million). Provisions of € 21.3 million are allocated for consulting costs in connection with capital market monitoring, € 2.4 million for rental guarantees and € 1.4 million through other
reorganization and restructuring expenses, mainly for the reorganization program GAGFAH 2015. In the prior year, Provisions of € 2.1 million were allocated through reorganization and restructuring expenses, € 1.2 million thereof were allocated for the reorganization program GAGFAH 2015. Further € 0.8 million are related to a recalculation of existing non-current restructuring provisions for rental guarantees and rental payments. € 0.1 million were allocated for prior restructuring measures.
The provisions for costs concerning sold properties mainly concern compensation for damages in connection with sold properties.
The provisions for severance payments, litigation costs and similar risks relate to estimated costs in connection with litigation relating to GAGFAH GROUP’s core business and development business as well as estimated costs in connection with employees leaving the Company. As of the balance sheet date, provisions of € 2.5 million (prior year: € 4.6 million) had been recognized. The decrease in this position is mainly influenced by the reversal of provisions relating to settlements in litigation in the amount of € 1.2 million.
In connection with the successful refinancing of the major loans in the GAGFAH Group in the year 2013, the provision for refinancing of € 4.5 million at the end of the year 2013 decreased to € 0.6 million at the end of the year 2014 (see section F.12. “Refinancing Expenses”).
The provision for restitution proceedings amounting to € 3.8 million (prior year: € 4.0 million) concerns restitution requirements subject to the German Act on the Clarification of Property Claims (“Gesetz zur Regelung offener Vermögensfragen”- “Vermögensgesetz”; VermG), for example the return of properties to their former owners and requirements to reimburse sales proceeds or rentals generated in this context. In the financial year 2014, an amount of € 0.2 million was utilized.
GAGFAH GROUP concluded a collective agreement (GAGFAH and GBH subgroup) and workplace 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 ensure employment for younger employees. In the reporting period and in the prior year, no new agreements were concluded. All arrangements that were concluded in the past have already started as of the balance sheet date.
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 workplace 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.
194 WHERE LIFE HAPPENS SHAREHOLDER INFORMATION DIRECTORS’ REPORT
Warranty obligations and latent risks totaling € 3.2 million (prior year: € 3.3 million) were mainly set up for cases of liability from sales activities and property development business.
Other provisions amounting to € 15.6 million (prior year € 9.7 million) comprise various smaller amounts, such as legal advise for projects, social insurance contribution united kingdom for a former manager and some additions by changes within the consolidated Group for the Griffin Flats NRW GmbH.
The outflows of cash and cash equivalents from non-current provisions are largely expected within the next five years.