IAS 19 para 141(d), gains on settlement, schemes closed to future accrual

Givaudan SA – Annual report – 31 December 2016

Industry: manufacturing

  1. Employee Benefits (extract 1)

Defined Benefit Plans (extract)

During 2016, the defined benefit plans held in the United States of America and United Kingdom have been frozen which means that no further build up of benefits will occur in the arrangements. These freezes resulted in one-off non-cash gains of CHF 55 million in the United States of America and CHF 7 million in the United Kingdom recognised in the line “other operating income” in the consolidated income statement.

  1. Employee Benefits (extract 2)

Information by country (extract)

United States of America

The main US pension plan is qualified under and is managed in accordance with the requirements of US federal law. In accordance with federal law the assets of the plan are legally separate from the employer and are held in a pension trust. The plan was frozen during the first six months of 2016 and consequently no further accrual of benefits will continue as at the date of enforcement of the plan change.

The law requires minimum and maximum amounts that can be contributed to the trust, together with limitations on the amount of benefits that may be provided under the plan. There are named fiduciaries that are responsible for ensuring the plan is managed in accordance with the law. The fiduciaries are responsible for the investment of the assets defining the investment strategy for long-term returns with an acceptable level of risk. The plan provides benefits on a defined benefit basis.

The accrued benefits based on service to the plan freeze are payable at retirement and on death in service. With exceptions for optional lump sum amounts for certain sections of the plan, the benefits are paid out as annuities.

Under IAS19 employee benefits, the pension obligations are calculated by using the projected unit credit method.

The Group expects to contribute CHF 6 million to these plans during 2017 (2016: CHF 16 million).

United Kingdom

The two occupational pension schemes (Quest UK Pension Scheme and Givaudan UK Pension Plan) are arranged under the applicable UK Pension Schemes and Pensions Acts and managed as legally autonomous pension trusts by the Boards of Trustees. The plans were frozen during the second half of 2016 and consequently no further accrual benefits will continue as at the date of enforcement of the plan change.

The Boards of Trustees are composed of two employee representatives and four employer representatives, for the Quest UK Pension Scheme, and three employee representatives, three employer representatives plus two pensioner representatives for the Givaudan UK Pension Plan. The Boards of Trustees are responsible for the investment of the assets defining the investment strategy for long-term returns with an acceptable level of risk. In their respective sections, both trusts provide benefits on a defined benefit basis and are now frozen to future accruals and members.

The accrued benefits based on service to the plan freeze are payable at retirement and on death in service. With exceptions for trivial amounts, transfer values, lump sum death benefits and tax free lump sums, the benefits are paid out as annuities.

Under IAS19 employee benefits, the pension obligations in the defined benefit sections of both the Quest UK Pension Scheme and the Givaudan UK Pension Plan are calculated by using the projected unit credit method.

The Group expects to contribute CHF 9 million to these plans during 2017 (2016: CHF 13 million).

  1. Other Operating Income

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For the year ended 31 December 2016, the Group recognised one-off non-cash gains of CHF 55 million in the United States of America and CHF 7 million in the United Kingdom (2015: CHF 32 million in the Netherlands).

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