2.24 Employee Benefits
Management Report Appendices Governance
Consolidated Financial Company Financial
a year or if there are any indications for a decline in value. For
finished properties, the net realizable value is generally equal to
the direct realizable value, which is mostly determined by means
of an internal or external appraisal. A downward value adjustment
is recognized if the carrying value exceeds the expected direct
realizable value, to the extent that the difference is on account
Rabobank as Lessee
Rabobank primarily enters into operating leases under which a
considerable portion of the risks and rewards of ownership are
retained by the lessor. Operating lease payments (less any
discounts granted by the lessor) are charged to the statement of
income on a linear basis over the term of the lease.
Rabobank as Lessor
A finance lease is recognized as a receivable under 'Loans and
advances to credit institutions' or 'Loans and advances to
customers', as applicable, at an amount equal to the net
investment in the lease. The net investment in the lease is the
present value of the nominal minimum lease payments and the
unguaranteed residual value. The difference between the gross
investment and the net investment in the lease is recognized as
unearned finance income. Lease income is recognized as interest
income over the term of the lease using the net investment
method, which results in a constant rate of return on the
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-offs and discounts granted to lessees)
is recognized under 'Net income from other operating activities'
on a linear basis over the term of the lease.
Provisions are recognized 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 Rabobankexpects a provision to be reimbursed,
for example under an insurance policy, the reimbursement is
recognized 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 recognized in the statement of income under
'Other administrative expenses'.
Restructuring provisions comprise payments under redundancy
schemes and other costs directly attributable to restructuring
programs.These costs are recognized 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
reorganization will be implemented.
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 include provisions for onerous contracts,
potential settlements, credit related contingent liabilities and
obligations under the terms of the deposit guarantee scheme.
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.
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
Annual Report 2018 - Consolidated Financial Statements