Gschäftsbericht 2018

Galenica financial statements 2018 | 111 Finance Notes to the consolidated financial statements of the Galenica Group 22. Employee benefit plans Accounting principles Galenica’s defined benefit obligation (DBO) is assessed annually by independent pension actuaries using the projected unit credit method. This method considers employees’ service in the periods prior to the reporting date and their future expected salary development. In addition, actuaries make use of statistical data such as employee turnover and mortality to calculate the defined benefit obligation. Any deficit or surplus in funded defined benefit plans (when the fair value of plan assets falls short of or exceeds the present value of the defined benefit obligation) is recorded as a net defined benefit liability or asset. Galenica only recognises a net defined benefit asset if it has the ability to use the surplus to generate future economic benefits that will be available to Galenica in the form of a reduction in future contributions. If Galenica does not have the ability to use the surplus or it will not generate any future economic benefit, Galenica does not recognise an asset, but instead discloses the effect of this asset ceiling in the notes. The components of defined benefit cost are service cost, net interest on the net defined benefit asset or liability and remeasurements of the net defined benefit asset or liability. Service cost is a component of personnel costs and comprises current service cost, past service cost (including gains and losses from plan amendments) and gains and losses from plan settlements. Net interest is determined by multiplying the net defined benefit liability or asset by a discount rate at the beginning of the reporting period. Net interest is included in the financial result. Actuarial gains and losses result from changes in actuarial assumptions and differences between actuarial assumptions and actual outcomes. Actuarial gains and losses resulting from remeasuring the defined benefit plans are recognised immediately in comprehensive income as remeasurements of the net defined benefit liability or asset. This includes any differences in the return on plan assets (excluding interest, based on the discount rate). Remeasurements of the net defined benefit liability or asset are not reclassified through profit or loss at any point in time. Galenica rewards employees for long service with jubilee benefits. These long-term benefits to employees are also meas- ured using the projected unit credit method and included in employee benefit liabilities. These obligations are unfunded. Changes in obligations are recognised in profit or loss in personnel costs and interest expense as part of the financial expense, in line with the defined benefit plans. All of the Galenica employees work in Switzerland and participate in the pension plans of Galenica (Galenicare Pension Fund, Bern or Galenica Pension Fund, Bern), which are financed by the employers and the employees. These plans are legally separate from Galenica and qualify as defined benefit plans. The pension plans cover the risks of the economic conse- quences of old age, disability and death in accordance with the Swiss Federal Occupational Retirement, Survivors and Dis- ability Pension Plans Act (BVG/LPP). The pension plans are structured in the legal form of a foundation. All actuarial risks are borne by the foundation and regularly assessed by the Board of Trustees based on an annual actuarial appraisal pre- pared in accordance with BVG/LPP. The company’s liabilities are limited to contributions that are based on a percentage of the insured salary under the Swiss law. Only in cases of a funded status that is significantly below a funded status of 100% as per the BVG/LPP law can Galenica be forced to pay additional contributions. The calculations made in these appraisals do not apply the projected unit credit method required by IFRS. If the calculations made in accordance with the provisions of BVG/LPP reveal a funded status of less than 100%, suitable restructuring measures need to be introduced. The Board of Trustees consists of employee and employer representatives. All defined benefit plans are funded. Plan assets are managed separately from Galenica’s assets by the independent pension funds. The most recent actuarial valuation was prepared as at 31 December 2018. The pension funds’ assets are invested in accordance with local investment guidelines. Galenica pays its contributions to the pension funds in accordance with the regulations defined by the funds. The final funded status pursuant to BVG/LPP is not available until the first quarter of the subsequent year. The projected funded status as at 31 December 2018 (unaudited) are for Galenicare Pension Fund 104.3% (previous year: 119.3%, final). and for Galenica Pension Fund 113.2% (previous year: 119.4%, final).