Financial report  >  Consolidated financial statements Geberit Group

Notes to the Consolidated Financial Statements

  1. 1. Basic information and principles of the report

  2. 2. Changes in Group organization

  3. 3. Summary of significant accounting policies

  4. 4. Risk assessment and management

  5. 5. Management of capital

  6. 6. Marketable securities

  7. 7. Trade accounts receivable

  8. 8. Other current assets and current financial assets

  9. 9. Inventories

  10. 10. Property, plant and equipment

  11. 11. Other non-current assets and non-current financial assets

  12. 12. Goodwill and intangible assets

  13. 13. Short-term debt

  14. 14. Other current provisions and liabilities

  15. 15. Long-term debt

  16. 16. Derivative financial instruments

  17. 17. Retirement benefit plans

    The Geberit Group manages defined benefit plans for its employees in various countries. Only the Swiss retirement benefit plans, which hold their assets in legally separate pension funds are funded plans. The biggest plans are managed in Switzerland and Germany, which together account for 98% (PY: 98%) of the total benefit obligations.

    The following table provides an overview of the current status of the benefit obligations, plan assets and reimbursement rights of reinsurance policies.

      2013 2012 1
      MCHF MCHF
    Switzerland    
    Benefit obligation (for funded retirement benefit plans) 401.7 421.5
    Plan assets at fair value 434.4 391.8
    Funded status 32.7 -29.7
         
    Germany    
    Benefit obligation (for unfunded retirement benefit plans) 177.2 165.6
    Funded status -177.2 -165.6
    Reimbursement rights 8.8 7.1
         
    Other plans    
    Benefit obligation (for unfunded retirement benefit plans) 11.7 10.9
    Funded status -11.7 -10.9
    Reimbursement rights 4.9 4.6
         
    Total    
    Benefit obligation (for all retirement benefit plans) 590.6 598.0
    Plan assets at fair value 434.4 391.8
    Funded status -156.2 -206.2
    Reimbursement rights 13.7 11.7

    1 Restatement see  Note 1

    Swiss retirement benefit plans

    The Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) governs occupational benefits in Switzerland. An employer with employees who must be insured is obliged to set up an independent pension fund entered in the register for occupational pension providers or affiliate with such a pension fund. The “Gemeinschaftsstiftung” of the Geberit Group is a foundation legally independent from the Geberit Group that insures all Geberit employees in Switzerland for compulsory and non-compulsory benefits. The Board of Trustees manages the Foundation and consists of employer and employee representatives in a parity ratio. The tasks of the Board of Trustees are set out in the BVG and the regulations based on the BVG adopted by the Board of Trustees.

    The benefits provided by the pension plan exceed the minimum prescribed by law. They are funded by the employer and employee contributions, plus the interest paid on the savings assets of the insured party at an interest rate defined annually by the Board of Trustees in accordance with the legal provisions. If an insured party leaves the Geberit Group and/or the pension plan before reaching retirement age, the vested benefits accrued under the BVG are transferred to the new pension fund of the insured party. In addition to the funds brought into the pension plan by the insured party, these vested benefits consist of the employer and employee contributions, plus a supplement prescribed by law. The pension benefits comprise lifelong retirement pensions, disability benefits and death benefits for the surviving dependents. On retirement, a maximum of 50% of the retirement assets can be withdrawn in the form of a lump sum. The employer and employees pay an equal contribution to the pension fund, which is settled monthly. The contribution amount is determined by the employee’s age and is calculated as a percentage of the pensionable salary.

    If the pension fund is underfunded in accordance with the BVG, the Board of Trustees is obliged by law to initiate measures to rectify the situation, such as reducing the interest paid on retirement assets, reducing the benefit entitlement, or collecting remedial contributions. Legally accrued benefits may not be reduced. With remedial contributions, the risk is shared between the employer and employees; the employer is not legally obliged to pay more than 50% of the additional contributions. The current financial status of the Swiss BVG-based pension plans does not require any remedial measures; the technical funding ratio of this foundation in accordance with the BVG was 113.6% as of December 31, 2013 (December 31, 2012: 109.8%).

    If a pension fund is overfunded as defined in IAS 19, the surplus funds are available to the company only to a very limited extent. The economic benefit for Geberit lies in future reductions in contributions and is calculated in accordance with IFRIC 14.

    The Board of Trustees is responsible for deciding on a strategy for investment of the plan assets. The objective is to achieve medium-term and long-term congruence and sustainability between the plan assets and the pension obligations under the BVG. Taking into account the foundation’s risk capacity, the investment strategy is defined as a targeted long-term investment structure.

    The funded plans also include the “Wohlfahrtsfonds” of the Geberit Group, which provides non-compulsory benefits only. This fund for managerial employees supplements the insurance cover granted by the existing pension plan. On retirement, the benefit is drawn as a lump sum or converted into a fixed-term annuity. The employer’s contributions must equal at least the total of all contributions by the insured party.

    German retirement benefit plans

    In Germany, there are capital account plans and annuity plans. The annuity plans are closed-end funds.

    Capital account plans
    The benefit plans and guidelines for payout are agreed in labor-management contracts. The employer can change the conditions by applying provisos. There can be special commitments based on the labor-management contracts or individual agreements, sometimes with annuity options. There is no minimum financing obligation.

    Every year, a pension contribution is determined as a percentage of the pensionable salary or the employees can choose an amount of deferred compensation with or without employer contributions. This then serves as the age-dependent component on which a pension is accrued. The pension components accrued during the years of active service, including any resulting promises of fixed bonus payments and the initial credit from the transitional arrangement, are paid out in the form of a one-off lump sum or in installments. Annuitization is possible with the consent of the employer. The pension is not dependent on the employee’s final salary.

    The employer manages the retirement accounts, informs the employees of the balance of their retirement assets, manages the claims and makes payments, sometimes involving the services of external service providers. When paying a lifelong pension, the employer must monitor the statutory and contractual obligations to adjust the pension and make adjustments when necessary.

    If a lump-sum benefit is annuitized, the lifelong payment of the pension and possible subsequent widow’s or widower’s pension can trigger a longevity risk. Thanks to the contractual adjustment rules applying to annuitization, the statutory obligation to make (and review) adjustments is not currently seen to harbor any inflation risk.

    The deferred compensation with/without employer contributions and possible demographic contributions retained by the employer are paid into reinsurance policies where the employer is the beneficiary. This partly covers the pension obligations.

    Annuity plans
    Annuity plans are governed by labor-management contracts or individual employment contracts. § 16 of the Company Pensions Act imposes an obligation on the employer to review the adjustment of pension payments. The extent of the adjustment requirement is usually determined by the consumer price index. Some individual employment contracts impose a contractual adjustment obligation. There is no minimum financing obligation.

    These are closed-end funds. Pension commitments as prescribed by the Essener Verband (Essen Association) have been made to some active employees. Fixed euro entitlements are maintained for departing employees with vested rights. Annuities are paid out to the beneficiaries in the form of lifelong monthly pension payments that include survivors’ benefit entitlements.

    The employer manages entitlements and claims and makes payments, sometimes involving the services of external service providers. It monitors the statutory and contractual obligations to adjust the pension and makes adjustments when necessary.

    The lifelong payment of the pension and possible subsequent widow’s or widower’s pension can trigger a longevity risk. The statutory obligation to make (and review) adjustments can also harbor an inflation risk.

    The net periodic pension costs of all defined benefit plans were as follows:

      2013 2012 1
      MCHF MCHF
    Current service cost 25.8 31.2
    Contributions of employees -8.6 -9.0
    Net interest cost for retirement benefit plans 5.3 8.5
    Net periodic pension cost 22.5 30.7

    The service cost for the Swiss retirement benefit plans was MCHF 17.1 in 2013 (PY: MCHF 24.6) and for the German retirement benefit plans MCHF 8.1 (PY: MCHF 6.1). The net interest cost for the Swiss retirement benefit plans was MCHF 0.4 in 2013 (PY: MCHF 2.5) and for the German retirement benefit plans MCHF 4.8 (PY: MCHF 5.9).

    The following table shows the remeasurements for the defined benefit plans in other comprehensive income in the Consolidated Statements of Comprehensive Income:

      2013 2012 1
      MCHF MCHF
    Actuarial gains (-) / losses: -32.7 -49.6
    - of which from changes in demographic assumptions 0.0 -42.2
    - of which from changes in financial assumptions -31.7 -19.0
    - of which from experience adjustments -1.0 11.6
    Return on plan assets (excluding interest based on discount rate) -32.1 -14.8
    Return on reimbursement rights (excluding interest based on discount rate) 0.0 0.0
    Asset ceiling adjustment 13.2 0.0
    Total pre-tax remeasurements recognized in other comprehensive income -51.6 -64.4

    The remeasurements recognized in other comprehensive income in the Consolidated Statements of Comprehensive Income in 2013 for the Swiss retirement benefit plans amounted to MCHF -50.3 (PY: MCHF -91.2) and for the German retirement benefit plans MCHF -1.4 (PY: MCHF 25.5).

    The following tables show the changes in benefit obligations, plan assets and reimbursement rights from January 1 to December 31:

      2013 2012 1
      MCHF MCHF
    Benefit obligation    
    At beginning of year 598.0 616.6
    Current service cost 25.8 31.2
    Interest cost 13.3 17.4
    Actuarial gains (-) / losses -32.7 -49.6
    New plans / plan adjustments 3.2 1.2
    Benefits paid -19.4 -17.8
    Translation differences 2.4 -1.0
    Benefit obligation at end of year 590.6 598.0

    1 Restatement see  Note 1

      2013 2012 1
      MCHF MCHF
    Plan assets at fair value    
    At beginning of year 391.8 359.3
    Interest income 7.5 8.7
    Return on plan assets (excluding interest based on discount rate) 32.1 14.8
    Contributions of employees 8.2 7.6
    Contributions of employers 8.2 13.2
    Benefits paid -13.4 -11.8
    Plan assets at fair value at end of year 434.4 391.8
         
    Funded status at end of year -156.2 -206.2
    Swiss retirement benefit plans: asset ceiling adjustment -13.2 0.0
    Swiss retirement benefit plans: capitalization of employer contribution reserve ( Note 11) -19.5 0.0
    Net funded status at end of year -188.9 -206.2

      2013 2012 1
      MCHF MCHF
    Fair value of reimbursement rights    
    At beginning of year 11.7 10.1
    Interest income 0.5 0.2
    Return on reimbursement rights (excluding interest based on discount rate) 0.0 0.0
    Contributions of employers 1.3 0.2
    Contributions of employees 0.4 1.4
    Benefits paid -0.2 0.0
    Translation differences 0.0 -0.2
    Fair value of reimbursement rights at end of year 13.7 11.7

    1 Restatement see  Note 1

    As of December 31, 2013, the fair value of the reinsurance policies for the German retirement benefit plans was MCHF 8.8 (PY: MCHF 7.1).

    The following table provides an analysis of the fair value and composition of the plan assets.

          2013       2012
      Listed on an active market Other Total   Listed on an active market Other Total
      MCHF MCHF MCHF   MCHF MCHF MCHF
    Equity instruments 175.1 9.9 185.0   130.6 9.6 140.2
    Bonds and other debt instruments 52.4 36.2 88.6   53.5 36.6 90.1
    Real estate property 22.9 94.2 117.1   20.9 87.3 108.2
    Cash and cash equivalents 37.1 0.0 37.1   42.2 0.0 42.2
    Other 2.0 4.6 6.6   6.1 5.0 11.1
    Total 289.5 144.9 434.4   253.3 138.5 391.8

    The effective income on the plan assets was +8.4% in 2013 and +7.6% in 2012. As of the end of 2013, the plan assets included MCHF 4.2 (PY: MCHF 3.1) in equity instruments of Geberit AG and MCHF 10.1 (PY: MCHF 10.1) in real estate used by the Group.

    The following table provides an analysis of the benefit obligations of the Swiss and German retirement benefit plans:

            2013         2012
      Active members Deferred members Pen-
    sioners
    Total   Active members Deferred members Pen-
    sioners
    Total
    Plan members (number)
    Swiss retirement benefit plans 1,149   458 1,607   1,154   436 1,590
    German retirement benefit plans 3,873 409 333 4,615   3,601 371 330 4,302
    Total plan members 5,022 409 791 6,222   4,755 371 766 5,892
                       
    Benefit obligation (in MCHF)
    Swiss retirement benefit plans 233.6   168.1 401.7   247.9   173.5 421.5
    German retirement benefit plans 131.8 16.4 29.0 177.2   121.9 14.9 28.8 165.6
    Total benefit obligation 365.4 16.4 197.1 578.9   369.8 14.9 202.3 587.1
    Share in % 63.2 2.8 34.0 100.0   63.0 2.5 34.5 100.0

    The weighted average duration of the benefit obligation for the Swiss retirement benefit plans is approx. 14 years and for the German retirement benefit plans approx. 12 years.

    Employer contributions of MCHF 8.2 are expected for the Swiss retirement benefit plans in 2014. In Switzerland, there is an employer contribution reserve of MCHF 19.5 that may be used for future contribution payments.

    The calculation of the benefit obligations for the material retirement benefit plans was based on the following assumptions (in %):

      2013   2012
      CH   DE   CH   DE
    Discount rate 2.4   3.1   1.9   3.0
    Salary increase rate 2.0   2.5   2.0   2.5
    Pension increase rate 0.0   2.0   0.0   2.0
    Mortality BVG 2010
    generations table
      2005G
    actuarial tables
      BVG 2010
    generations table
      2005G
    actuarial tables

    The trend for sickness costs does not affect benefit obligations in Switzerland or Germany.

    The following sensitivity analysis shows how the present value of the benefit obligation for the material retirement benefit plans (CH and DE) would change if a single reporting date assumption were changed. Every assumption change was analyzed separately. Interdependencies were not taken into account.

      Swiss retirement benefit plans: increase/reduction (-) in present value of benefit obligation   German retirement benefit plans: increase/reduction (-) in present value of benefit obligation
    Discount rate      
    Increased by 50 basis points -5.8%   -5.4%
    Reduced by 50 basis points +7.4%   +5.9%
    Salaries      
    Increased by 25 basis points +0.32%   +0.04%
    Reduced by 25 basis points -0.31%   -0.04%

    The Group’s income statement for 2013 also includes expenses for defined contribution plans of MCHF 2.2 (PY: MCHF 2.0).

  18. 18. Participation plans

  19. 19. Deferred tax assets and liabilities

  20. 20. Other non-current provisions and liabilities

  21. 21. Contingencies

  22. 22. Capital stock and treasury shares

  23. 23. Earnings per share

  24. 24. Other operating expenses, net

  25. 25. Financial result, net

  26. 26. Income tax expenses

  27. 27. Cashflow figures

  28. 28. Segment reporting

  29. 29. Related party transactions

  30. 30. Foreign exchange rates

  31. 31. Subsequent events

  32. 32. Additional disclosures on financial instruments

  33. 33. Group companies as of December 31, 2013