Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
reimbursement is recognised as a separate asset but only if the
reimbursement is virtually certain. The provisions are carried
at the discounted value of the expected future cash flows.
The additions to and release of provisions is shown in the profit
and loss account under 'Other administrative expenses'.
Restructuring
Restructuring provisions comprise payments under redundancy
schemes and other costs directly attributable to restructuring
program mes. These costs are accounted for during the period in
which a legal or actual payment obligation arises for Rabobank,
a detailed plan has been prepared for redundancy pay, and
there are realistic expectations among the parties concerned
that the reorganisation will be implemented.
Tax and legal issues
The provision for tax and legal issues is based on the best
possible estimates available in the reporting period, taking into
account legal and tax advice.The timing of the cash outflow
of these provisions is uncertain because the outcome of the
disputes and the time involved are unpredictable.
Other provisions
This item includes provisions for onerous contracts, credit
guarantees and obligations under the terms of the deposit
guarantee scheme.
2.22 Employee benefits
Rabobank has various pension plans in place based on the local
conditions and practices of the countries in which it operates.
In general, the plans are financed by payments to insurance
companies or trustee administered funds as determined by
periodic actuarial calculations. A defined benefit pension
plan is one that incorporates a promise to pay an amount of
pension benefit, which is usually based on several factors such
as age, number of years in service and remuneration. A defined
contribution plan is one in the context of which Rabobank
pays fixed contributions to a separate entity (a pension fund)
and acquires no legal or constructive obligation if the fund has
insufficient assets to pay all the benefits to employee-members
of the plan in respect of service in current and past periods.
Pension obligations
The obligation under the defined benefit pension plans is the
present value of the defined benefit pension obligation in
the reporting period afterthe deduction of the fair value of
fund investments. The defined benefit obligation is calculated
annually by independent actuaries based on the projected
unit credit method. The present value of the defined benefit
obligation is determined by the estimated future outflow of
cash funds based on the interest rates of high-quality corporate
bonds with terms which approach that of the corresponding
obligation. The majority of pension plans are career-average
plans. The costs of these plans i.e. the net pension charges
forthe period after netting off employee contributions and
interest, are included under'Staff costs'. Net interest expenses
or income are calculated by applying the discount rate at the
beginning of the year for the asset or liability based on the
defined benefit pension plan.
Actuarial gains and losses arising from actual developments
or actuarial assumptions are recognised in the consolidated
statement of comprehensive income.
Defined contribution plans
Under defined contribution plans, Rabobank pays contributions
into publicly or privately managed pension insurance plans
on a compulsory, contractual or voluntary basis. Once the
contributions have been made, Rabobank has no further
payment obligations.The regular contributions are costs for the
year in which they are due and are included on this basis under
'Staff costs'.
Other post-employment obligations
Some Rabobank business units provide other post-employment
allowances.To become eligible for such benefits, the usual
requirement is that the employee remains in service until
retirement and has been with the company a minimum number
of years. The expected costs of these benefits are accrued
during the years of service, based on a system similar to that for
defined benefit pension plans.The obligations are valued each
year by independent actuaries.
Variable remuneration
The costs of variable remuneration paid unconditionally and
in cash are recognised in the year in which the employee
renders the services. The costs of conditional payments in
cash are included in staff costs in the profit and loss account
in the period during which the employee's services are
received, which equals the vesting period of the cash payment.
The liability is recognised in other liabilities.The accounting
treatment of equity instrument-based payments is disclosed in
Paragraph 2.23.
2.23 Equity instrument-based payments
Remuneration for services rendered by identified staff is made
in the form of cash payments based on equity instruments that
are similar to, and have the same characteristics as, Rabobank
Certificates.The costs ofthe services received are based on the
awarded equity instruments'fair value on the award date and
are recalculated annually at the value applicable at the time.
189 Notes to the consolidated financial statements
