EUROPEAN UNION ACCOUNTING RULE 12 EMPLOYEE BENEFITS

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1 EUROPEAN UNION ACCOUNTING RULE 12 EMPLOYEE BENEFITS

2 Page 2 of 18 I N D E X 1. Introduction Objective Scope Definitions Short-term employee benefits Recognition and measurement Short-term compensated absences Post-employment benefits Recognition and measurement Present value of the defined benefit obligations Plan assets and reimbursement rights Curtailments and settlements Other long-term employee benefits Termination benefits Disclosures Effective date Reference to other rules... 18

3 Page 3 of Introduction The Staff Regulations of Officials of the European Union ( EU ) provide for various employee benefits (retirement pensions, invalidity pensions, survivor s pensions, medical insurance) for staff in service, invalided staff and retired staff. Each year of service performed by EU employees entitles them to various benefits (sickness, retirement, etc.). These benefits, which they will receive after a period of activity, constitute a commitment on the part of the European Union which must be entered in the accounts. The arrival of new staff, the retirement of serving staff, and changes in interest rates or in mortality tables are all factors or assumptions that have a direct influence on the valuation of those commitments. The commitments are constantly changing and must be valued at the close of each reporting period. The Commission makes an estimate at each year-end. Determining the value of post-employment defined benefit-type commitments is a very technical task that requires recourse to actuarial expertise in order to: - define the arrangements for applying the actuarial valuation method; - guide the choice of assumptions; and - determine the commitments to be entered in the accounts and the actuarial gains or losses. This accounting rule deals with four categories of employee benefits: (a) Short-term employee benefits; (b) Post-employment benefits; (c) Other long-term employee benefits; and (d) Termination benefits. The principle underlying all of the detailed requirements of this rule is that the cost of providing employee benefits should be recognised in the period in which the benefit is earned by the employee, rather than when it is paid or payable. The principal objectives of post-employment accounting are to measure the cost associated with employees benefits and to recognise that cost over the employees respective service periods. The periodic costs of post-employment plans have to be assigned properly to the periods in which the related economic benefits are received by the employers incurring these costs. 2. Objective The objective of this accounting rule is to prescribe the accounting treatment and disclosure of employee benefits (that is, all forms of consideration given by an enterprise in exchange for service rendered by employees). The rule requires the recognition of:

4 Page 4 of 18 - A liability when an employee has provided service in exchange for employee benefits to be paid in the future; and - An expense when the EU consumes the economic benefits or service potential arising from service provided by an employee in exchange for employee benefits. The principle underlying all of the detailed requirements of this rule is that the cost of providing employee benefits should be recognised in the period in which the benefit is earned by the employee, rather than when it is paid or payable. The principal objectives of post-employment accounting are to measure the cost associated with employees benefits and to recognise that cost over the employees respective service periods. The periodic costs of post-employment plans have to be assigned properly to the periods in which the related economic benefits are received by the employers incurring these costs. This accounting rule does not propose to set out in detail the actuarial calculations to be performed. 3. Scope Since they prepare and present financial statements under the accrual basis of accounting, the EU and its consolidated bodies shall apply this accounting rule in their role as an employer, in accounting for all employee benefits. The employee benefits to which this rule applies include those provided: (a) Under formal plans or other formal agreements between the EU and individual employees, groups of employees or their representatives; (b) Under legislative requirements, or through industry arrangements, whereby entities are required to contribute to national, state, industry, or other multiemployer plans or where entities are required to contribute to the composite social security programme; or (c) By those informal practices that give rise to a constructive obligation. Informal practices give rise to a constructive obligation where the entity has no realistic alternative but to pay employee benefits. Employee benefits include: (a) Short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, and non-monetary benefits (such as medical care) for current employees; (b) Post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care; (c) Other long-term employee benefits, which may include long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits; and (d) Termination benefits.

5 Page 5 of Definitions Actuarial gains and losses comprise: (a) Experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and (b) The effects of changes in actuarial assumptions. Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the reporting entity) that: (a) Are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay or fund employee benefits; and (b) Are available to be used only to pay or fund employee benefits, are not available to the reporting entity s own creditors (even in bankruptcy), and cannot be returned to the reporting entity, unless either: (i) The remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting entity; or (ii) The assets are returned to the reporting entity to reimburse it for employee benefits already paid. Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service in the current period. Defined benefit plans are post-employment benefit plans other than defined contribution plans. Under a defined benefit plan, the employer s obligation extends beyond any contributions paid to a third party. If there are insufficient assets to cover the benefits corresponding to the services performed by staff, the employer is obliged to pay additional contributions. The employer has an obligation to pay the agreed benefits to staff in active service and to former staff. The employer bears the actuarial risk. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees. Interest cost is the increase during a period in the present value of a defined benefit obligation which arises because the benefits are one period closer to settlement.

6 Page 6 of 18 Other long-term employee benefits are employee benefits (other than post-employment benefits or termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related service. Past service cost is the increase in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, postemployment benefits or other long-term employee benefits. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced). Plan assets comprise assets held by a long-term employee benefit fund and qualifying insurance policies. To finance obligations relating to staff benefits, assets may be dedicated to cover them. The notion of plan assets is rather restrictive, as only assets that are truly dedicated and devoted to employee benefits obligations can be recognised as such. Post-employment benefits are employee benefits (other than termination benefits) that are payable after the completion of employment. Post-employment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits for one or more employees. The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. The return on plan assets is interest, dividends and other revenue derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs of administering the plan and less any tax payable by the plan itself. Short-term employee benefits are employee benefits (other than termination benefits) that fall due within twelve months after the end of the period in which the employees render the related service. Termination benefits are employee benefits payable as a result of either a EU decision to terminate an employee s employment before the normal retirement date or an employee s decision to accept voluntary redundancy in exchange for those benefits. Vested employee benefits are employee benefits that are not conditional on future employment.

7 Page 7 of Short-term employee benefits Within the EU, short-term employee benefits concern salaries (and related contributions), shortterm compensated absences (paid leave) and non-monetary benefits. No actuarial assumptions are required to measure such obligations and no discounting is required. 5.1 Recognition and measurement When an employee has rendered service to an entity during an accounting period, the EU shall recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service: (a) as a liability (accrued expense) on its balance sheet. If the amount already paid exceeds the undiscounted amount of the benefits, the EU shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and (b) as an expense in the economic outturn account. 5.2 Short-term compensated absences The EU compensates employees for absence for various reasons including vacation, sickness and short-term disability, maternity or paternity. Entitlement to compensated absences falls into two categories: (a) Accumulating; and (b) Non-accumulating. Accumulating compensated absences are those that are carried forward and can be used in future periods if the current period s entitlement is not used in full. The EU shall recognise the expected cost of short-term employee benefits in the form of compensated absences: (a) In the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and (b) In the case of non-accumulating compensated absences, when the absences occur. For this reason a liability for untaken holidays (accumulating compensated absences) at year-end must be included on the balance sheet under the current liabilities heading (accrued charges). The amount should be calculated as the additional amount that the EU expects to pay as a result of the unused entitlement that has accumulated at the reporting date (net of taxes and pension contributions that return to the EU). There are no particular disclosure requirements for these items.

8 Page 8 of Post-employment benefits Post-employment benefits include, for example: - Retirement benefits, such as pensions; and - Other post-employment benefits, such as post-employment medical care. Arrangements whereby an entity provides post-employment benefits are post-employment benefit plans. The EU applies this accounting rule to all such arrangements whether or not they involve the establishment of a separate entity, such as a pension scheme, superannuation scheme or retirement benefit scheme, to receive contributions and to pay benefits. This includes the pensions of the Members and former Members of the Commission, Court of Justice (and Court of First Instance), Court of Auditors, the Secretaries General of the Council, the Ombudsman and the EDPS. These liabilities are shown on the individual balance sheets of the relevant Institutions and pensions are paid from their individual budgets, whereas the staff pension liability is only recognised on the Commission balance sheet since the Commission pays all staff pensions, even if these staff worked for another Institution or Agency. Post-employment benefit plans are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions. In order to be classified as a defined contribution plan a post-employment benefit plan must require the entity to pay fixed contributions into a separate entity. Under defined contribution plans: (a) The EU s legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. Thus, the amount of the post-employment benefits received by the employee is determined by the amount of contributions paid by the EU (and perhaps also the employee) to a postemployment benefit plan or to an insurance company, together with investment returns arising from the contributions; and (b) In consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall on the employee. for defined contribution plans is straightforward because the reporting entity s obligation for each period is determined by the amounts to be contributed for that period. Consequently, no actuarial assumptions are required to measure the obligation or the expense and there is no possibility of any actuarial gain or loss. Moreover, the obligations are measured on an undiscounted basis, except where they do not fall due wholly within twelve months after the end of the period in which the employees render the related service. Examples of cases where the EU s obligation is not limited to the amount that it agrees to contribute to the fund are when the entity has a legal or constructive obligation through: (a) A plan benefit formula that is not linked solely to the amount of contributions; (b) A guarantee, indirectly through a plan or directly, of a specified return on contributions; or (c) Those informal practices that give rise to a constructive obligation.

9 Page 9 of 18 Under defined benefit plans: (a) The EU s obligation is to provide the agreed benefits to current and former employees; and (b) Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the EU. If actuarial or investment experience are worse than expected, the EU s obligation may be increased. Unlike defined contribution plans, the definition of a defined benefit plan does not require the payment of contributions to a separate entity. Currently, the European Community operates an unfunded defined benefit pension scheme for its staff. It should account not only for its legal obligation under the formal terms of a defined benefit plan, but also for any constructive obligation that arises from its informal practices. Informal practices give rise to a constructive obligation where the EU has no realistic alternative but to pay employee benefits. Post-employment benefits comprise not only retirement pensions paid to staff of the Union. Other obligations must also be evaluated and entered in the accounts. Examples include: - survivors pensions; - orphans pensions; - severance grants; - invalidity pensions; - family allowances; - post-employment medical insurance benefits. 6.1 Recognition and measurement For a defined contribution scheme, when an employee has rendered service to the EU during a period, the EU shall recognise the contribution payable to a defined contribution plan in exchange for that service: (a) As a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the reporting date, the EU shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and (b) As an expense in the economic outturn account. Where contributions to a defined contribution plan do not fall due wholly within twelve months after the end of the period in which the employees render the related service, they shall be discounted using a discount rate. for defined benefit plans is complex because actuarial assumptions are required to measure the obligation and the expense and there is a possibility of actuarial gains and losses. Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service.

10 Page 10 of 18 for defined benefit plans involves the following steps: (a) Using actuarial techniques to make a reliable estimate of the amount of benefit that staff of the European Union have earned in return for their service in the current and previous periods. This requires the EU to determine how much benefit is attributable to the current and prior periods and to make estimates (actuarial assumptions) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will influence the cost of the benefit; (b) Discounting that benefit using the Projected Unit Credit Method in order to determine the present value of the defined benefit obligation and the current service cost; (c) Determining the fair value of any plan assets; (d) Determining the total amount of actuarial gains and losses to be recognised; (e) Determining any past service cost; and (f) Determining the gain or loss on curtailment or settlement of the scheme. The amount recognised as a defined benefit liability on the balance sheet should be the total of the following amounts: (a) The present value of the defined benefit obligation at the balance sheet date; (b) Minus any past service cost not yet recognised; and (c) Minus the fair value at the reporting date of plan assets (if any) out of which the obligations are to be settled directly. This gross defined benefit liability with regard to pensions must be reduced by the estimated amount of taxes that will be applied to future pension payments since these taxes revert to the EU as revenue. The EU shall determine the present value of defined benefit obligations and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the reporting date. The EU shall recognise the net total of the following amounts in the economic outturn account: (a) Current service cost; (b) Interest cost; (c) The expected return on any plan assets and on any reimbursement rights; (d) Actuarial gains and losses; (e) Past service cost; and (f) The effect of any curtailments or settlements. 6.2 Present value of the defined benefit obligations The ultimate cost of a defined benefit plan may be influenced by many variables, such as final salaries, employee turnover and mortality, medical cost trends and, for a funded plan, the investment earnings on the plan assets. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of time.

11 Page 11 of 18 In order to measure the present value of the post-employment benefit obligations and the related current service cost, it is necessary to: (a) Apply an actuarial valuation method; (b) Attribute benefit to periods of service; and (c) Make actuarial assumptions. Actuarial valuation method The EU should use the Projected Unit Credit Method (PUCM) to determine the present value of their defined benefit obligations and the related current service cost and, where applicable, past service cost. Attributing benefit to periods of service In determining the present value of its defined benefit obligations, the related current service cost and, where applicable, past service cost, the EU should attribute benefit to periods of service under the plan s benefit formula. If an employee s service in later years will lead to a materially higher level of benefit than in earlier years, the EU must attribute benefit on a straight-line basis from: - the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service); until - the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. Actuarial assumptions Actuarial assumptions should be unbiased and mutually compatible. Actuarial assumptions are the EU s best estimate of the variables that will determine the ultimate cost of providing postemployment retirement benefits. Actuarial assumptions comprise: (a) Demographic assumptions about the future characteristics of current and former employees (and their dependants) who are eligible for benefits. Demographic assumptions deal with matters such as: - mortality during and after employment; - staff turnover, disability and early retirement; - the proportion of members affiliated to the scheme and their dependants who are eligible for benefits; and - claims for reimbursement under medical schemes. (b) Financial assumptions, dealing with items such as: - the discount rate; - future levels of staff salaries and benefits; - in the case of medical benefits, future medical costs, including, where material, the cost of administering claims and paying benefits; and - the expected rate of return on plan assets. Financial assumptions shall be based on market expectations, at the reporting date, for the period over which the obligations are to be settled.

12 Page 12 of 18 Discount Rate The rate used to discount post-employment benefit obligations shall reflect the time value of money. For the EU, it should be determined by reference to market yields on government bonds at the reporting date. The currency and term of the government bonds should be consistent with the currency and estimated duration of the post-employment benefit obligations. Salaries, benefits and medical costs Post-employment benefit obligations should be measured on a basis that reflects: (a) Estimated future salary increases; (b) The benefits set out in the terms of the plan at the reporting date; and (c) Estimated future changes in the level of any state benefits that affect the benefits payable under a defined benefit plan (if, and only if, either those changes were enacted before the reporting date, or past history, or other reliable evidence, indicates that those state benefits will change in some predictable manner). Assumptions about medical costs shall take account of estimated future changes in the cost of medical services, resulting from both inflation and specific changes in medical costs. Actuarial gains and losses Actuarial gains and losses are the effects of differences between the previous actuarial assumptions and what has actually occurred and the effect of changes in actuarial assumptions. The EU shall recognise all actuarial gains and losses immediately in the economic outturn account. Past service cost In measuring its defined benefit liability the EU shall recognise past service cost as an expense on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes to, a defined benefit plan, the EU shall recognise past service cost immediately. Past service cost is the increase or decrease in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, or reduction of post-employment benefits or other long-term employee benefits. Past service cost may be either positive or negative. 6.3 Plan assets and reimbursement rights Fair value of plan assets Plan assets should be recognised at fair value. The European Union does not currently have any assets devoted to financing staff pension commitments. In doing so, the general principles set out in EU Rule 11 Financial Assets and Liabilities must be observed. Where plan assets include qualifying insurance policies that exactly match the amount and timing of some or all of the benefits payable under the plan, the fair value of those insurance policies is deemed to be the present value of the related obligations.

13 Page 13 of 18 Reimbursements When, and only when, it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefit obligation, the EU shall recognise its right to reimbursement as a separate asset. It shall measure the asset at fair value. In all other respects, the EU shall treat that asset in the same way as plan assets. In the economic outturn account, the expense relating to a defined benefit plan may be presented net of the amount recognised for a reimbursement. Guarantee of staff pensions by Member States In accordance with Article 83 of the Staff Regulations, the Member States guarantee the payment of staff pension benefits collectively according to the scale fixed for the financing of this expenditure. Pensions are paid from the EU budget, which is financed from own resources arising in the year of payment; however, only if it were the case that the EU budget fails to pay these pensions as they fall due can the Member States guarantee be called upon. The EU has no right to call upon the guarantee at each year-end. Given that this commitment of Member States towards the payment of staff pensions thus takes the form of a guarantee, it is clear that the commitment therefore does not meet the criteria necessary for recognition as a receivable, and so no receivable shall be recognised on the EU balance sheet. This is because EU Rule 4 defines receivables as rights or revenue entitlements arising from past events that the European Union expects to receive from third parties. As a result, the debtor must pay a specific amount to the European Union within a certain period of time and in accordance with the conditions laid down in the Union legislation. Thus, receivables must be reported on the assets side of the balance sheet, as they are resources under the control of the reporting entity resulting from past events. It is clear that in the case of the Member States guarantee there may be a total specific amount calculated at each year-end concerning the staff pension liability, but this amount cannot be split by individual Member State. Furthermore, it cannot be said that the EU expect to receive specific amounts from each Member State concerning staff pensions as stated above, the EU would only receive amounts from the Member States if the EU budget was not sufficient to pay the pensions as they fell due. The above paragraph on reimbursements should also be considered, in particular the phrase When, and only when, it is virtually certain that another party will reimburse. This certainty does not exist in the case of the Member States commitment, which should be seen as a guarantee should the funds not be available from the EU itself. 6.4 Curtailments and settlements A curtailment occurs when the EU either makes a material reduction in the number of employees covered by a plan or amends the terms of a defined benefit plan such that a material element of future service by current employees will no longer qualify for benefits, or will qualify only for reduced benefits. A curtailment may arise from an isolated event, such as the discontinuance of an operation or termination of a pension plan. An event is material enough to qualify as a curtailment if

14 Page 14 of 18 the recognition of a curtailment gain or loss would have a material effect on the financial statements. A settlement occurs when the EU enters into a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan, for example when a lump-sum cash payment is made to, or on behalf of, plan participants in exchange for their rights to receive specified post-employment benefits. The European Union should recognise gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on a curtailment or settlement shall comprise: - Any resulting change in the present value of the defined benefit obligation; - Any resulting change in the fair value of the plan assets; and - Any related actuarial gains and losses and past service cost that have not been recognised previously. Before determining the effect of a curtailment or settlement, the EU shall re-measure the obligation (and the related plan assets, if any) using current actuarial assumptions (including current market interest rates and other current market prices). 7. Other long-term employee benefits Other long-term employee benefits include, for example: (a) Long-term compensated absences such as long-service or sabbatical leave; (b) Jubilee or other long-term service benefits; (c) Long-term disability benefits; (d) Deferred compensation paid twelve months or more after the end of the period during which it is earned; and (e) Compensation payable by the EU until an individual enters new employment. The measurement of other long-term employee benefits is usually not subject to the same degree of uncertainty as the measurement of post-employment retirement benefits. Furthermore, the introduction of, or changes to, other long-term employee benefits rarely results in a material amount of past service cost. For these reasons, this accounting rule lays down a simplified method for the subsequent measurement of other long-term employee benefits. The amount recognised as a liability should equal the net total of the following amounts: - The present value of the defined benefit obligation at the reporting date, minus - The fair value at the reporting date of plan assets (if any) out of which the obligations are to be settled directly.

15 Page 15 of 18 For other long-term employee benefits, the EU shall recognise the net total of the following amounts as expense or revenue, except to the extent that another accounting rule requires or permits their inclusion in the cost of an asset: (a) Current service cost; (b) Interest cost; (c) The expected return on any plan assets and on any reimbursement right recognised as an asset; (d) Actuarial gains and losses, which shall all be recognised immediately; (e) Past service cost, which shall all be recognised immediately; and (f) The effect of any curtailments or settlements. As with defined benefit obligations, the European Union shall recognise all actuarial gains and losses immediately in the economic outturn account. There are no specific disclosure requirements for these benefits. 8. Termination benefits The EU shall recognise termination benefits as a liability and an expense when, and only when, the EU is demonstrably committed to either: (a) Terminate the employment of an employee or group of employees before the normal retirement date; or (b) Provide termination benefits as a result of an offer to encourage voluntary redundancy. The EU is demonstrably committed to a termination when, and only when, it has a detailed formal plan for the termination and is without realistic possibility of withdrawal. The detailed plan shall include, as a minimum: (a) The location, function, and approximate number of employees whose services are to be terminated; (b) The termination benefits for each job classification or function; and (c) The time at which the plan will be implemented. Implementation shall begin as soon as possible and the period of time to complete implementation shall be such that material changes to the plan are not likely. Where termination benefits fall due more than 12 months after the reporting date, they shall be discounted using a discount rate. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits shall be based on the number of employees expected to accept the offer.

16 Page 16 of Disclosures The European Union shall disclose information that enables the users of its financial statements to evaluate the nature of its defined benefit plans and the financial effects of changes in those plans during the period. It shall disclose the following information about its defined benefit plans: (a) The European Union s accounting policy for recognising actuarial gains and losses; (b) A general description of the type of plan; (c) A reconciliation of opening and closing balances of the present value of the defined benefit obligation showing separately, if applicable, the effects during the period attributable to each of the following: (i) current service cost; (ii) interest cost; (iii) contributions by plan participants; (iv) actuarial gains or losses; (v) benefits paid; (vi) past service cost; (vii) curtailments; and (viii) settlements; (d) An analysis of the defined benefit obligation into amounts arising from plans that are wholly unfunded and amounts arising from plans that are wholly or partly funded; (e) A reconciliation of the opening and closing balances of the fair value of plan assets and of the opening and closing balances of any reimbursement right recognised as an asset showing separately, if applicable, the effects during the period attributable to each of the following: (i) expected return on plan assets; (ii) actuarial gains and losses; (iii) contributions by the employer; (iv) contributions by plan participants; (v) benefits paid; (vi) entity combinations; and (vii) settlements; (f) A reconciliation of the present value of the defined benefit obligation in (c) and the fair value of the plan assets in (e) to the assets and liabilities recognised in the balance sheet, showing at least: (i) the net actuarial gains or losses not recognised in the balance sheet; (ii) the past service cost not recognised in the balance sheet; (iii) the fair value at the reporting date of any reimbursement right recognised as an asset (with a brief description of the link between the reimbursement right and the related obligation); and (iv) the other amounts recognised in the balance sheet;

17 Page 17 of 18 (g) The total expense recognised in the economic outturn account for each of the following, and the line item(s) of the economic outturn account in which they are included: (i) current service cost; (ii) interest cost; (iii) expected return on plan assets; (iv) expected return on any reimbursement right recognised as an asset; (v) actuarial gains and losses; (vi) past service cost; and (vii) the effect on any curtailment or settlement; (h) The total amount recognised in the statement of changes in net assets for actuarial gains and losses (if applicable); (i) The cumulative amount of actuarial gains and losses recognised in the statement of changes in net assets (if applicable); (j) For each major category of plan assets, the percentage or amount that each major category constitutes of the fair value of the total plan assets; (k) The amounts included in the fair value of plan assets for: (i) each category of the entity s own financial instruments; and (ii) any property occupied by, or other assets used by, the entity; (l) A narrative description of the basis used to determine the overall expected rate of return on assets, including the effect of the major categories of plan assets; (m) The actual return on plan assets, as well as the actual return on any reimbursement right recognised as an asset; (n) The principal actuarial assumptions used as at the reporting date, including, when applicable: (i) the discount rates; (ii) the basis on which the discount rate has been determined; (iii) the expected rates of return on any plan assets for the periods presented in the financial statements; (iv) the expected rates of return for the periods presented in the financial statements on any reimbursement right recognised as an asset; (v) the expected rates of salary increases; (vi) medical cost trend rates; and (vii) any other material actuarial assumptions used; (o) The effect of an increase of one percentage point and the effect of a decrease of one percentage point in the assumed medical cost trend rates on: (i) the aggregate of the current service cost and interest cost components of net periodic post-employment medical costs; and (ii) the accumulated post-employment benefit obligation for medical costs. For the purposes of this disclosure, all other assumptions shall be held constant; (p) The amounts for the current annual period and previous four annual periods (earliest required period to be 2008) of: (i) The present value of the defined benefit obligation, the fair value of the plan assets and the surplus or deficit in the plan; and (ii) The experience adjustments arising on:

18 Page 18 of 18 The plan liabilities expressed either as (1) an amount or (2) a percentage of the plan liabilities at the reporting date; and The plan assets expressed either as (1) an amount or (2) a percentage of the plan assets at the reporting date; (q) The EU s best estimate, as soon as it can reasonably be determined, of contributions expected to be paid to the plans during the annual period beginning after the reporting date. 10. Effective date This rule shall be effective for annual financial statements covering periods beginning on or after 1 January In the first year of application of this updated rule, the EU retains the option, allowed under IPSAS 25 paragraphs 171, 173 and 175, whereby comparative information and certain disclosures are not presented. 11. Reference to other rules IPSAS 25 EU Rule 11 Employee Benefits Financial Assets and Liabilities

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