Notes to the
consolidated
financial statements
continued
23 Pensions and other post-employment benefits continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
2016
2015
157
In Serbia, the Company has an unfunded defined benefit plan that provides a lump-sum benefit upon retirement of the employee, as prescribed
by Serbian law. The benefit is based on a fixed multiple of the higher of the (i) average gross salary of the employee, (ii) average gross salary in the
company or (iii) average gross salary in the country, each determined at the time the employee retires. There is no legal requirement to fund these
plans with contributions or other plan assets.
The pension plans expose the Company to actuarial risks such as: longevity risk, interest rate risk, currency risk, salary risk and investment risk.
Longevity risk relates to the mortality assumptions used to value the defined benefit obligation, where an increase in participants’ life expectancies
will increase a plan’s liability. Interest rate risk relates to the discount rate used to value the defined benefit obligation, where a decrease in
the discount rate will increase a plan’s liability; however this will be partially offset by an increase in the return on a plan’s investments in debt
instruments. The pension plans may mitigate interest rate risk by entering into interest rate swap contracts. Currency risk relates to the fact that a
plan holds investments that may not be denominated in the same currency as the plan’s obligations. The pension plans may mitigate currency risk
by purchasing forward currency instruments. Salary risk relates to salary increase assumptions used to value the defined benefit obligation, where
an increase will result in a higher plan liability. See below for more details on the Company’s asset-liability matching strategy employed to manage
its investment risk.
132
14
11
136
18
10
1
165
Remeasurements recognized:
Return on plan assets, excluding amounts included in net interest (income) cost
(Gain) loss from changes in demographic assumptions
(Gain) loss from changes in financial assumptions
Experience (gains) losses
Components of defined benefit cost recognized in other comprehensive income
Total net defined benefit cost
(3o6)
27
473
(48)
146
311
Net defined benefit cost is comprised of the following components. The net interest (income) expense is presented within net financial expenses in
the income statement and plan remeasurements are presented as other comprehensive income. All other components of net defined benefit cost
are presented in the income statement as cost of sales, selling expenses, and general and administrative expenses, depending on the functional
areas of the employees earning the benefits.
million
Service cost
Current service cost
Net interest expense
Administrative cost
Termination benefits
Components of defined benefit cost recorded in the income statement
228
(13)
(186)
24
53
210
