11.1 Post-employment benefits: annual changes

 

31.12.2010

31.12.2009

A. Opening balance

1,055

1,057

B. Increases

40

96

B.1 Allocations for the year

35

26

B.2 Other increases

5

70

C. Reductions

35

98

C.1 Payments made

31

95

C.2 Other reductions

4

3

D. Closing balance

1,060

1,055

Total

1,060

1,055

“Other increases” represents the impact of the discounting of the provision accrued up to 31 December 2006 and still held in the company.

Payments made represent the benefits paid to employees during the year.

11.2 Other information

Under IFRS, a company’s liabilities regarding the benefit that will be paid to employees at the conclusion of the employer/employee relationship (post-employment benefits) should be entered in the statement of financial position based on actuarial calculations of the amount that will be paid at maturity.

Specifically, these allocations must take into account the amount already accrued over the period at the reporting date, projecting it into the future in order to calculate the amount that will be paid at the conclusion of the employer/employee relationship. This sum must then be discounted to take into account the time that will pass until payment.

Following the coming into force of the Financial Law 2007, which brought the reform regarding supplementary pension plans - as per Lgs. Decree no. 252 of 5 December 2005 - forward to 1 January 2007, the employee was given a choice as to whether to allocate the post-employment benefit maturing as from 1 January 2007 to alternative pension funds or to maintain these amounts in the company. In the latter case, the funds are transferred by the company to a specific fund managed by Social Security.

This reform has led to changes in terms of the accounting of such fund, both in terms of the amounts accumulated up to 31 December 2006 and in terms of that accumulating as from 1 January 2007. Specifically:

  • Amounts accumulating as from 1 January 2007 constitute a defined contribution plan, both where the employee has chosen to allocate these funds to a supplementary fund and where he/she has decided to allocate them to a treasury fund managed by Social Security. The amounts accumulated must be calculated according to contributions due and not actuarially;

  • Amounts accumulated up to 31 December 2006 continue to be considered as a defined benefit plan and as such are calculated using actuarial techniques. However, in comparison to calculation methods applied before 31 December 2006, methods used following 31 December 2006 do not involve proportionally attributing the benefit to the length of service, as the employee’s service is considered performed in its entirety due to the accounting modification to amounts maturing as from 1 January 2007.