Notes to financial statements Employee benefits

Notes to financial statements Employee benefits

 

 

IFRS 2 44–45(a)

IFRS 2 50

12. Share-based payment arrangements Notes to financial statements Employee benefits

See accounting policy in Note 45(E)(ii).

A. Description of share-based payment arrangements Notes to financial statements Employee benefits

At 31 December 2018, the Group had the following share-based payment arrangements.

i. Share option programmes (equity-settled) Notes to financial statements Employee benefits

On 1 January 2014 and 1 January 2017, the Group established share option programmes that entitle key management personnel to purchase shares in the Company. On 1 January 2018, a further grant on similar terms was offered to key management personnel and senior employees. Under these programmes, holders of vested options are entitled to purchase shares at the market price of the shares at grant date. Currently, these programmes are limited to key management personnel and other senior employees.

The key terms and conditions related to the grants under these programmes are as follows; all options are to be settled by the physical delivery of shares.

Notes to financial statements Employee benefits

ii. Replacement awards (equity-settled) Notes to financial statements Employee benefits

In connection with the acquisition of Papyrus, the Group exchanged equity-settled share-based payment awards held by employees of Papyrus for 150,000 equity-settled share-based payment awards of the Group with a contractual life of nine years from the vesting date (see Note 34(A)(ii)).

iii. Share purchase plan (equity-settled) Notes to financial statements Employee benefits

On 1 January 2018, the Group offered 26 of its employees the opportunity to participate in an employee share purchase plan. To participate in the plan, the employees are required to save an amount of 5% of their gross monthly salary, up to a maximum of €300 per month, for a period of 36 months. Under the terms of the plan, at the end of the 36-month period the employees are entitled to purchase shares using funds saved at a price of 20% below the market price at grant date. Only employees that remain in service and save the required amount of their gross monthly salary for 36 consecutive months will become entitled to purchase the shares. Employees who cease their employment, do not save the required amount of their gross monthly salary in any month before the 36-month period expires, or elect not to exercise their options to purchase shares will be refunded their saved amounts.

iv. Share appreciation rights (cash-settled) Notes to financial statements Employee benefits

On 1 January 2013 and 1 January 2018, the Group granted 100,000 and 300,000 share appreciation rights (SARs), respectively, to employees that entitle them to a cash payment after three years of service. The SARs expire at the end of a five-year period after grant date. The amount of the cash payment is determined based on the increase in the share price of the Company between grant date and the time of exercise.

Details of the liabilities arising from the SARs were as follows.

IFRS 2.51(b)(i)

IFRS 2.51(b)(ii)

iv. Share appreciation rights (cash-settled)

The liabilities at 31 December 2017 were settled during 2018.

B. Measurement of fair values Notes to financial statements Employee benefits

i. Equity-settled share-based payment arrangements Notes to financial statements Employee benefits

IFRS 2 46

IFRS 2 47(a)(i)

IFRS 2 47(a)(iii)

IFRS 2 47(a)(iii)

The fair value of the employee share purchase plan (see (A)(iii)) has been measured using a Monte Carlo simulation. The fair value of the employee share options (see (A)(i) and (A)(ii)) has been measured using the Black-Scholes formula. Service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.

The requirement that the employee has to save in order to purchase shares under the share purchase plan has been incorporated into the fair value at grant date by applying a discount to the valuation obtained. The discount has been determined by estimating the probability that the employee will stop saving based on historical behaviour.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows.

IFRS 2 47(a)(i)

i. Equity-settled share-based payment arrangements

IFRS 2 47(a)(ii)

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour.

At 31 December 2018, a total amount of €78 thousand was invested by the participants in the share purchase plan (see Note 41(B)(ii)) and has been included in ‘other trade payables’ (see Note 29).

IFRS 2 33A

ii. Cash-settled share-based payment arrangement Notes to financial statements Employee benefits

The fair value of the SARs (see (A)(iv)) has been measured using the Black-Scholes formula. Service and non-market performance conditions attached to the arrangements were not taken into account in measuring fair value.

The inputs used in the measurement of the fair values at grant date and measurement date of the SARs were as follows.

Blog note:

Although it is not specifically required by IFRS 2, the Group has disclosed information about the fair value measurement of its SARs. In our view, these disclosures should be provided for cash-settled share-based payments.

For awards granted during the period, disclosures about fair value measurement at grant date and at the reporting date should be given; for awards granted in previous periods but unexercised at the reporting date, disclosures about fair value measurement at the reporting date should be given.

IFRS 2 52

ii. Cash-settled share-based payment arrangement

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour.

C. Reconciliation of outstanding share options Notes to financial statements Employee benefits

IFRS 2 45(b)

The number and weighted-average exercise prices of share options under the share option programmes (see (A)(i)) and replacement awards (see (A)(ii)) were as follows.

IFRS 2 45(b)(i)

IFRS 2 45(b)(iii)

IFRS 2 45(b)(iv)

IFRS 2 45(b)(ii)

IFRS 2 45(b)(vi)

IFRS 2 45(b)(vii)

C. Reconciliation of outstanding share options

IFRS 2 45(d)

IFRS 2 45(c)

The options outstanding at 31 December 2018 had an exercise price in the range of €8.08 to €10.50 (2017: €10.00 to €10.50) and a weighted-average contractual life of 6.4 years (2017: 5.2 years).

The weighted-average share price at the date of exercise for share options exercised in 2018 was €10.00 (2017: no options exercised).

D. Expense recognised in profit or loss Notes to financial statements Employee benefits

For details of the related employee benefit expenses, see Note 13(E).

13. Employee benefits Notes to financial statements Employee benefits

See accounting policies in Note 45(E).

IFRS 2 51(b)(i)

13. Employee benefits

IAS 1 69

IAS 19 133

Although it is not required to distinguish the current and non-current portions of assets and liabilities arising from post-employment benefits, the Group distinguishes between the current and non-current portions of obligations arising from long-term employee benefits if it does not have an unconditional right to defer settlement of the liability at least 12 months from the reporting date.

IAS 19 139(a)

For details on the related employee benefit expenses, see (E).

The Group contributes to the following post-employment defined benefit plans in [Countries X and Y].

  • Plan A entitles a retired employee to receive an annual pension payment. Directors and executive officers (see Note 41(B)(ii) retire at age 60 and are entitled to receive annual payments equal to 70% of their final salary until the age of 65, at which time their entitlement falls to 50% of their final salary. Other retired employees are entitled to receive annual payments equal to 1/60 of final salary for each year of service that the employee provided.
  • Plan B reimburses certain medical costs for retired employees.

The defined benefit plans are administered by a single pension fund that is legally separated from the Group. The board of the pension fund comprises three employee and two employer representatives and an independent chair. The board of the pension fund is required by law to act in the best interests of the plan participants and is responsible for setting certain policies (e.g. investment, contribution and indexation policies) of the fund.

IAS 19 139(b)

These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

A. Funding Notes to financial statements Employee benefits

IAS 19 147(a)

Plan A is fully funded by the Group’s subsidiaries, except for the obligation for directors and executive officers, which is funded by the Company. The funding requirements are based on the pension fund’s actuarial measurement framework set out in the funding policies of the plan.

The funding of Plan A is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in (D). Employees are not required to contribute to the plans. Plan B is unfunded.

The Group has determined that, in accordance with the terms and conditions of the defined benefit plans, and in accordance with statutory requirements (including minimum funding requirements for Plan A) for the plans of the respective jurisdictions, the present value of refunds or reductions in future contributions is not lower than the balance of the total fair value of the plan assets less the total present value of obligations. This determination has been made on a plan-by-plan basis. As such, no decrease in the defined benefit asset was necessary at 31 December 2018 or 31 December 2017.

IAS 19 147(b)

The Group expects to pay €350 thousand in contributions to its defined benefit plans in 2018.

B. Movement in net defined benefit (asset) liability Notes to financial statements Employee benefits

The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit (asset) liability and its components.

IAS 19 140

IAS 19 141(a)

IAS 19 141(d)

IAS 19 141(b)

IAS 19 141(c)

IAS 19 141(c)(ii)

IAS 19 141(c)(iii)

IAS 19 141(c)(i)

IAS 19 141(e)

IAS 19 141(f)

IAS 19 141(g)

IAS 19 140

B. Movement in net defined benefit (asset) liability

B. Movement in net defined benefit (asset) liability

IAS 19 138

a. The Group has more than one defined benefit plan and has generally provided aggregated disclosures in respect of these plans, on the basis that they are not exposed to materially different risks. Further disaggregation of some or all of the disclosures – e.g. by geographic locations or by different characteristics – would be required if this were not the case.

b. Although it is not specifically required by IAS 19 Employee Benefits, the Group has disclosed the subtotals of items recognised in profit or loss and OCI. This disclosure is provided for illustrative purposes only.

IAS 21 39

c. A net obligation under a defined benefit plan may be denominated in a foreign currency from the point of view of the sponsor’s financial statements. In our view, in that case the net defined benefit liability (asset) should first be calculated in the currency in which it is denominated, and the resulting net amount should then be translated into the sponsor’s functional currency. As a result, the foreign exchange gain or loss arising on translation will be recognised together with other foreign exchange gains and losses, rather than as part of the IAS 19 remeasurement. This is different from the situation illustrated above. In this case, the sponsor of the plan is a foreign subsidiary, and therefore the translation difference is recognised in OCI in the usual way.

IAS 19 139(c)

During 2018, the pension arrangements for a number of employees in [Country X] were adjusted to reflect new legal requirements in that country regarding the retirement age. As a result of the plan amendment, the Group’s defined benefit obligation decreased by €100 thousand (2017: nil). A corresponding past service credit was recognised in profit or loss during 2018.

C. Plan assets Notes to financial statements Employee benefits

IAS 19 142

Plan assets comprise the following.

IAS 19 142(b)

IAS 19 142(c)

IAS 19 142(e)

IAS 19 143

IAS 19 143

C. Plan assets

IAS 19 142

IAS 19 146

All equity securities and government bonds have quoted prices in active markets. All government bonds are issued by European governments and are rated AAA or AA, based on [Rating Agency Y] ratings.

At each reporting date, an Asset-Liability Matching study is performed by the pension fund’s asset manager, in which the consequences of the strategic investment policies are analysed. The strategic investment policy of the pension fund can be summarised as follows:

  • a strategic asset mix comprising 40–50% equity securities, 40–50% government bonds and 0–15% other investments;
  • interest rate risk is managed with the objective of reducing the cash flow interest rate risk by 40% through the use of debt instruments (government bonds) and interest rate swaps;
  • currency risk is managed with the objective of reducing the risk by 30% through the use of forward foreign currency contracts; and
  • longevity risk is managed with the objective of reducing the risk by 25% through the use of longevity swaps.

D. Defined benefit obligation Notes to financial statements Employee benefits

IAS 1 125

IAS 19 144

i. Actuarial assumptions Notes to financial statements Employee benefits

The following were the principal actuarial assumptions at the reporting date (expressed as weighted averages).

i. Actuarial assumptions

IAS 19 144

Assumptions regarding future longevity have been based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows.

i. Actuarial assumptions

IAS 19 147(c)

At 31 December 2018, the weighted-average duration of the defined benefit obligation was 17.1 years (2017: 17.5 years).

ii. Sensitivity analysis Notes to financial statements Employee benefits

ii. Sensitivity analysis

IAS 1 125

IAS 1 129

IAS 19 145

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

E. Employee benefit expenses Notes to financial statements Employee benefits

IAS 19 53

IFRS 2 51(a)

IFRS 2 51(a)

E. Employee benefit expenses

IFRS 2 IG19

IFRS 2 BC252–BC255

a. The Group has included the remeasurement of the liability in relation to its cash-settled share-based payment arrangement in ‘employee benefit expenses’. Alternatively, an entity may include the amount in ‘finance income’ or ‘finance costs’.

Notes to financial statements – Employee benefits

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See also: The IFRS Foundation

Notes to financial statements Employee benefits