Contents Foreword Management report Corporate governance
Operating leases
Assets leased under operating leases are included in the
statement of financial position under 'Property and equipment'.
The assets are depreciated over their expected useful lives
in line with those of comparable items of property and
equipment. Rental income (less write-downs and discounts
granted to lessees) is recognised under 'Other net operating
income' on a linear basis over the term of the lease.
2.21 Provisions
Provisions are recognised for obligations (both legal and
constructive) arising as a result of a past event where it is
probable that an outflow of resources will be required to
settle the obligation and a reliable estimate can be made of
the amount of the obligation. If Rabobank expects a provision
to be reimbursed, for example under an insurance policy, the
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 releases of provisions are recognised in the
statement of income under 'Other administrative expenses'.
Restructuring
Restructuring provisions comprise payments under redundancy
schemes and other costs directly attributable to restructuring
programmes. These costs are recognised during the period in
which the legal or actual payment obligation arises, 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
estimates available at the end of 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
Other provisions include 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 to trustee administered funds determined by
periodic actuarial calculations. A defined benefit pension plan is
one that incorporates an obligation to pay an agreed amount of
pension benefit, which is usually based on several factors such
Consolidated Financial Statements Company Financial Statements Pillar 3
as age, number of years' service and remuneration. A defined
contribution plan is one in which fixed contributions are paid
to a separate entity (a pension fund) with no further legal or
constructive obligation on the part of the employer should
the fund have insufficient assets to settle its obligations to
employee-members of the plan.
Pension obligations
The obligation under defined benefit pension plans is the
present value of the defined benefit pension obligation at the
end of the reporting period reduced by the fair value of the
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 as the estimated future outflow of
cash funds based on the interest rates of high-quality corporate
bonds with terms that approximate those of the corresponding
obligation. The majority of pension plans are career-average
plans. The costs of these plans (being the net pension charge
for the period after deducting employee contributions and
interest) are included under 'Staff costs'. Net interest expense/
income is determined by applying the discount rate at the
beginning of the reporting period to the asset or liability of the
defined benefit pension plan.
Actuarial gains and losses arising from events and/or changes
in actuarial assumptions are recognised in the statement of
comprehensive income.
Defined contribution plans
Under defined contribution plans, contributions are paid into
publicly or privately managed pension insurance plans on
a compulsory, contractual or voluntary basis. These regular
contributions are recognised as expense in the year in which
they are due and they are included under 'Staff costs'.
Other post-employment obligations
Some of Rabobank's business units provide other post-
employment benefits. To become eligible for such benefits, the
usual requirement is that the employee remains in service until
retirement and has been with the company for 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
calculated annually by independent actuaries.
Variable remuneration
Variable remuneration payable unconditionally and in cash
is recognised in the year in which the employee renders the
service. Conditional cash remuneration is included, on a straight
line basis, in staff costs in the statement of income over the
267 Notes to the company financial statements