2013 Annual report

NOTE 17

PENSION COSTS AND LIABILITIES

THE GROUP'S PENSION PLANS

Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in defined benefit and defined contribution plans complying with the requirements of the mandatory occupational pension.

Defined benefit plans provide employees with the right to defined future pension benefits. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each pension plan. The amount is an estimate of future benefits that employees have earned based on years of service and salary at retirement. Benefits are discounted to present value, and the recognised obligation is reduced by the fair value of plan assets for funded pension schemes. Changes in assumptions, staff numbers and variances between estimated and actual salary increases and return on assets result in actuarial gains and losses. Actuarial gains and losses and gains and losses resulting from a curtailment or termination of pension plans, are recognised immediately in the income statement.

The defined benefit pension plans consist of group schemes as well as some additional arrangements, including employees with a retirement basis over 12 G, and AFP. For salaries exceeding 12 G, Ferd has established a pension scheme implying that the employees earn a pension right each year. The scheme was closed for new hires when established. The right comprises a share of the salary in excess of 12 G together with a return component depending on the employee's chosen risk profile. The pension plan has many similarities with a contribution scheme, but as Ferd is not making regular payments to a fund, but has elected to take the risk of return itself, the scheme shall be classified as a benefit scheme for accounting purposes. Ferd has recognised the obligation as a pension liabiity and is expensing the current deposits and the current return as incurred. The liability has not been discounted.

For defined contribution plans, the Group's obligations are limited to making specific contributions. Payments to defined contribution pension plans are recognised as expenses in the income statement when the employees have rendered services entitling them to the contribution.

Other service related long-term benefits

In addition to the pension schemes described above, Ferd has obligations related to future health contributions for some groups of employees in the USA.

ECONOMIC ASSUMPTIONS

Ferd has defined benefit plans in several countries with varying economic conditions affecting the assumptions that are the basis for calculating pension obligations. The parameters are adapted to conditions in each country. The discount rate is determined as a weighted average of the yields at the reporting date on AA rated corporate bonds, or government bonds in cases where there is no market for AA rated corporate bonds. The government bond interest rate is applied for Norwegian schemes. To the extent that the bond does not have the same maturity as the obligation, the discount rate is adjusted. Actuarial assumptions for demographic factors and retirement are based on generally accepted principles in the insurance business. Future mortality rates are based on statistics and mortality tables (K2013).

From 2013, the pension liabilities are recognised net less the pension funds. Net pension liabilities are discounted, implying that the return (previously an mportant economic assumption) is no longer relevant.

Economic assumptions in Norwegian companies at 31 December

2013

2012

Discount rate

Expected wage growth

0-3,75%

0-3,25%

Future expected pension regulation

Expected regulation of base amount (G)

Interval for economic assumptions in foreign companies at 31 December

2013

2012

Discount rate

2.00 - 4.10

2.00 - 4.15

Expected wage growth

0.00 - 1.00

0.00 - 1.00

Future expected pension regulation

0.00 - 0,60

0.00 - 0.55

PENSION OBLIGATIONS

Reconciliation of net liability against balance sheet

NOK 1 000

2013

2012

Pension liabilities for defined benefit pension plans

Pension assets for defined benefit pension plans

Total defined benefit obligation recognised in the consolidated statement of financial position

DEFINED BENEFIT PLANS

Specification of recognised liability

NOK 1 000

2013

2012

Present value of unfunded pension liabilities

Present value of wholly or partly funded obligations

Fair value of pension assets

Total defined benefit obligation recognised in the consolidated statement of financial position

Movements in liabilities for defined benefit pension plans

NOK 1 000

2013

2012

Liability for defined benefit pension plans at 1 January

Present value of current service cost

Interest expenses on the pension liability

Demographic estimate deviation on the pension liability

Financial estimate deviation on the pension liability

Settlement of pension plans

Curtailment of pension plans

Plan changes

Change in liability due to acquisition/sale of subsidiaries

Benefits paid

Social security tax

Exchange differences on foreign plans

Liability for defined benefit pension plans at 31 December

Expected payments of defined pension liabilities

NOK 1 000

2013

Total benefit pension due

Movement in fair value of pension assets for defined benefit pension plans

 

NOK 1 000

2013

2012

Fair value of pension assets at 1 January

Expected return from pension assets

Financial estimate deviation on the pension assets

Contributions from employer

Administration expenses

Contributions from employees

Increase in pension funds due to the acquisition of subsidiaries

Settlements

Benefits paid

Exchange difference on foreign plans

Fair value of pension assets at 31 December

Pension assets include the following

NOK 1 000

2013

2012

Equity instruments

Government stock

Corporate stock

Other debt instruments, including structured debt

Property investments

Bank deposits

Other assets

Total pension funds

Actuarial deviations recognised in comprehensive income

NOK 1 000

2013

2012

Current year actuarial deviation on pension liabilities (defined benefit schemes)

Net actuarial deviation on defined benefit schemes recognised in comprehensive income

PENSION COSTS

NOK 1 000

2013

2012

Defined benefit plans

Defined contribution plans

Early retirement and other schemes

Total pension costs recognised in current year payroll costs

DEFINED BENEFIT PLAN PENSION COSTS

Pension costs recognised in income statement

NOK 1 000

2013

2012

Present value of this year's pension earned

Contribution from employees

Curtailment of pension schemes and plan changes

Social security tax

Administration costs

Total pension costs frm benefit schemes recognised in salary costs

Interest expense on the pension liability

Expected return on pension funds

Total pension costs from recognised in finance costs