Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
Legal issues
The provision for legal issues is based on the best estimates
available at the end of the reporting period, taking into account
legal 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,
potential settlements, credit related contingent liabilities 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
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
period of the year in which the employee's services are received
and the remaining three years of the vesting period (i.e.
over four years). The liability is recognised in'Other liabilities'.
The accounting treatment of payments based on equity
instruments is disclosed in section 2.23.
2.23 Variable remuneration
For certain identified staff, remuneration for services
rendered is settled in the form of cash payments based on
equity instruments that are similar to, and have the same
characteristics as, Rabobank Certificates. The costs of the
services received are based on the fair value of the equity
instruments on the award date and are restated annually to
fair value at the time. The costs related to the award of equity
instruments during the period of the employee's contract are
included in staff costs in the statement of income over the
period of the year of award and the remaining three years of the
vesting period of the equity instruments (i.e. over four years).
The liability is recognised in 'Other liabilities'.
2.24 Tax
Current tax receivables and payables are offset where there is
a legally enforceable right to offset and where simultaneous
treatment or settlement is intended. Deferred tax assets and
liabilities are offset where there is a legally enforceable right to
offset and where they relate to the same tax authority and arise
within the same taxable entity.
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