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(6) Provisions for pensions
The provisions for pensions mainly concern German companies. This item includes
obligations arising from current pensions and future pension entitlements.
The Freudenberg Group pension scheme consists of both defined contribution and
defined benefit pension plans. In the case of the defined contribution plans,
there are no additional obligations apart from the payment of contributions. Contributions
paid are expensed under personnel expenses and amounted to 2.4 million Euro in
2003 (2002: 1.7 million Euro).
The value of provisions for defined benefit plans was calculated on actuarial principles by the projected unit credit method. For the German companies, a discount rate of 5.5 percent (2002: 5.75 percent) and a pension increase trend of 2 percent (2002: 2 percent) were taken into account. The assumed trend in salaries and wages had no effect on the value of pension obligations. In the case of the foreign companies, these assumptions were adapted to reflect conditions in the country concerned in each case.
Actuarial gains and losses are recognized as expenses if they exceed 10 per cent of the greater of the present value of pension obligations and the fair value of the pension plan assets (the “corridor” approach). The amount in excess of this figure is expensed over the average remaining working lives of the workforce.