Arla Foods Consolidated Annual Report 2021
110
Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Funding
4.7 PENSION LIABILITIES
Table 4.7.g Recognised in the income statement
(EURM)
2021
2020
Current service costs
Administration costs
Recognised as staff costs
Interest costs on pension liabilities
Interest income on plan assets
Recognised as financial costs
Total amount recognised in the income statement
5
4
5
4
23
-21
22
30
-28
2
7
6
Contents
III
Accounting policies
Pension liabilities and similar non-current liabilities
The group has post-employment pension plan
arrangements with a significant number of current and
former employees. The post-employment pension plan
agreements take the form of defined benefit plans and
defined contribution plans.
Defined contribution plans
For defined contribution plans, the group pays fixed
contributions to independent pension companies.
The group has no obligation to make supplementary
payments beyond those fixed payments, and the
risk and reward of the value of the pension plan
therefore rests with plan members, and not the
group. Contributions to defined contribution plans
are expensed in the income statement as incurred.
Defined benefit plans
Defined benefit plans are characterised by the group's
obligation to make specific payments from the date the
plan member is retired, depending on, for example, the
member's seniority and final salary. The group is subject
to the risks and rewards associated with the uncertainty
whether the return generated by the assets will meet
the pension liability, which are affected by assumptions
concerning mortality and inflation.
The group's net liability is the amount presented in the
balance sheet as pension liability.
The net liability is calculated separately for each defined
benefit plan. The net liability is the amount of future
pension benefits that employees have earned in current
and prior periods (i.e. the liability for pension payments
for the portion of the employee's estimated final salary
earned at the balance sheet date) discounted to a
present value (the defined benefit liability), less the fair
value of assets held separately from the group in
a plan fund.
The group uses qualified actuaries to annually calculate
the defined benefit liability using the projected unit
credit method.
The balance sheet amount of the net liability is
impacted by remeasurement, which includes the
effect of changes in assumptions used to calculate
the future liability (actuarial gain and losses) and
the return generated on plan assets (excluding
interest). Remeasurements are recognised in other
comprehensive income.
Interest cost for the period is calculated using the
discounted rate used to measure the defined benefit
liability at the start of the reporting period applied
to the carrying amount of the net liability, taking into
account changes arising from contributions and benefit
payments. The net interest cost and other costs relating
to defined benefit plans are recognised in the income
statement. The net liability primarily covers defined
benefit plans in the UK and Sweden.
Table 4.7.h Recognised in other comprehensive income
(EURM)
2021
2020
Remeasurements of defined benefit plans
Actuarial gains and losses on liabilities from changes in financial assumptions (OCI)
Actuarial gains and losses on liabilities from changes
44
-153
in demographic assumptions (OCI)
17
Return on plan assets, excluding amounts included in net interest
on the net defined benefit liability
Total amount recognised in other comprehensive income
-47
141
-3
5
AA Uncertainties and estimates
The defined benefit liability is assessed based on a
number of assumptions, including discount rates,
inflation rates, salary growth and mortality. A small
difference in actual variables compared to assumptions
and any changes in assumptions can have a significant
impact on the net position.View entire presentation