v2.3.0.11
Note 19 - Provisions
 12 Months Ended
Dec. 31, 2011
Disclosure - Note 19 - Provisions  
Disclosure of provisions
(19) Provisions
Provisions based on due dates as at December 31 were as follows:
 
Provisions
 
 
2011
2010
€ millions
Current
Non-Current
Total
Current
Non-Current
Total
Pension plans and similar obligations (see Note (19a))
25
71
96
2
76
78
Other provisions (see Note (19b))
537
195
732
1,285
216
1,501
Total
562
266
828
1,287
292
1,579
 
 
 
(19a) Pension Plans and Similar Obligations
We maintain several defined benefit and defined contribution pension plans for our employees in Germany and at foreign subsidiaries, which provide for old age, disability, and survivors' benefits. The measurement dates for the domestic and foreign benefit plans are December 31. Individual benefit plans have also been established for members of our Executive Board. Furthermore, in certain countries we provide termination indemnity benefits to employees regardless of the cause for termination. These types of benefits are typically defined by law in these foreign countries.
 
Our domestic defined benefit pension plans provide participants with pension benefits that are based on the length of service and compensation of employees.
 
There is also a domestic employee-financed pension plan for which SAP guarantees a minimum return on investment which is equivalent to the return guaranteed by the insurer. Even though the risk that SAP would be liable for a return that cannot be met by the insurance company is very remote, these employee-financed plans do not qualify as defined contribution plans under IFRS and are included in domestic plan assets and plan liabilities.
 
Foreign defined benefit pension plans provide participants with pension benefits that are based on compensation levels, age, and length of service.
 
The following table shows the development of the present values of the defined benefit obligations and the fair value of the plan assets with a reconciliation of the funded status to net amounts:
 
Change in the Present Value of the DBO and the Fair Value of the Plan Assets
 
 
Domestic Plans
Foreign Plans
Other Post-Employment Plans
 
Total
€ millions
2011
2010
2011
2010
2011
2010
2011
2010
Change in benefit obligation
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
416
346
439
343
25
20
880
709
Service cost
-2
-4
19
17
3
3
20
16
Interest cost
20
18
14
17
1
1
35
36
Employee contributions
25
46
4
4
0
0
29
50
Actuarial loss (+)/gain (-)
11
13
0
29
-1
2
10
44
Benefits paid
-5
-4
-28
-17
-2
-1
-35
-22
Acquisitions/divestitures
-4
1
-1
4
0
4
-5
9
Curtailments/settlements
0
0
-3
0
0
-4
-3
-4
Other changes
1
0
0
0
0
0
1
0
Past service cost
0
0
-3
-3
0
0
-3
-3
Foreign currency exchange rate changes
0
0
16
45
1
0
17
45
Benefit obligation at year-end
462
416
457
439
27
25
946
880
     Thereof fully or partially funded plans
462
416
417
404
13
12
892
832
     Thereof unfunded plans
0
0
40
35
14
13
54
48
 
 
 
 
 
 
 
 
 
Change in plan assets
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
414
345
386
311
4
4
804
660
Expected return on plan assets
19
17
7
19
1
0
27
36
Employer contributions
2
1
17
31
3
5
22
37
Employee contributions
25
46
4
4
0
0
29
50
Benefits paid
-5
-4
-28
-17
-2
-1
-35
-22
Acquisitions/divestitures
-4
0
0
2
0
0
-4
2
Settlements
0
0
-3
0
0
-4
-3
-4
Other changes
0
0
0
0
-1
0
-1
0
Actuarial loss (-)/gain (+)
9
9
-7
-1
0
0
2
8
Foreign currency exchange rate changes
0
0
11
37
0
0
11
37
Fair value of plan assets at year-end
460
414
387
386
5
4
852
804
Funded status at year-end
-2
-2
-70
-53
-22
-21
-94
-76
 
 
 
 
 
 
 
 
 
Amounts recognized in the Consolidated Statement of Financial Position:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-current pension assets
0
0
2
2
0
0
2
2
Accrued benefit liability (current)
0
0
-25
-2
0
0
-25
-2
Accrued benefit liability (non-current)
-2
-2
-47
-53
-22
-21
-71
-76
Total
-2
-2
-70
-53
-22
-21
-94
-76
 
 
The following weighted average assumptions were used for the actuarial valuation of our domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the respective measurement date:
 
Actuarial Assumptions for Defined Benefit Liabilities
 
%
Domestic Plans
Foreign Plans
Other Post-Employment Plans
 
2011
2010
2009
2011
2010
2009
2011
2010
2009
Discount rate
4.6
4.9
5.1
3.2
3.3
4.7
5.4
5.7
5.7
Rate of compensation increase
2.5
2.5
2.5
1.8
1.8
2.3
3.0
5.0
6.9
 
 
The assumed discount rates are derived from rates available on high-quality corporate bonds and government bonds for which the timing and amounts of payments match the timing and the amounts of our projected pension payments.
 
The components of total expense of defined benefit pension plans for the years 2011, 2010, and 2009 recognized in operating expense were as follows:
 
Total Expense of Defined Benefit Pension Plans
 
€ millions
Domestic Plans
Foreign Plans
Other Post-Employment Plans
Total
 
2011
2010
2009
2011
2010
2009
2011
2010
2009
2011
2010
2009
Service cost
-2
-4
-6
19
17
15
3
3
2
20
16
11
Interest cost
20
18
18
14
17
15
1
1
1
35
36
34
Expected return on plan assets
-19
-17
-15
-7
-19
-14
-1
0
0
-27
-36
-29
Curtailment
0
0
0
0
0
-1
0
0
0
0
0
-1
Past service cost
0
0
0
-3
-3
0
0
0
0
-3
-3
0
Total expense
-1
-3
-3
23
12
15
3
4
3
25
13
15
Actual return on plan assets
28
26
-3
5
18
42
0
0
0
33
44
39
 
 
Due to the fact that our domestic defined benefit pension plans primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service cost may turn into a credit as a result of adjusting the defined benefit liability's carrying amount to the fair value of the qualifying plan assets. Such adjustments are recorded in service cost.
We have recognized the following amounts of actuarial gains and losses for our defined benefit pension plans:
 
Actuarial Gains (Losses) on Defined Benefit Pension Plans
 
€ millions
Domestic Plans
Foreign Plans
Other Post-Employment Plans
 
Total
 
2011
2010
2009
2011
2010
2009
2011
2010
2009
2011
2010
2009
Beginning balance of actuarial gains (-) and losses (+) on defined benefit plans
-6
-10
-18
86
53
57
0
-2
-2
80
41
37
Actuarial gains (-) and losses (+) on defined benefit plans recognized during the period
2
4
5
7
30
3
-1
2
0
8
36
8
Other changes
0
0
3
0
0
-5
-1
0
0
-1
0
-2
Foreign currency exchange rate changes
0
0
0
4
3
-2
1
0
0
5
3
-2
Ending balance of actuarial gains (-) and losses (+) on defined benefit plans
-4
-6
-10
97
86
53
-1
0
-2
92
80
41
 
 
For the determination of the total expense for the years 2011, 2010, and 2009, the projection of the defined benefit obligation and the fair value of the plan assets as at December 31, 2011, 2010, and 2009, the following principal actuarial assumptions (expressed as weighted averages for our foreign and post-employment benefit plans) were used:
 
Actuarial Assumptions for Total Expense
 
%
Domestic Plans
Foreign Plans
Other Post-Employment Plans
 
2011
2010
2009
2011
2010
2009
2011
2010
2009
Discount rate
4.9
5.1
5.8
3.2
4.4
5.0
5.3
5.6
6.5
Expected return on plan assets
4.5
4.5
4.5
1.5
5.1
5.3
7.8
7.6
6.5
Rate of compensation increase
2.5
2.2
2.1
1.8
1.8
2.3
3.1
4.9
6.3
 
 
Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies. The expected rate of return on plan assets for our domestic benefit plans is calculated by reference to the expected returns achievable on the insured policies given the expected asset mix of the policies.
 
The expected return assumptions for our foreign plan assets are based on weighted average expected long-term rates of return for each asset class, estimated based on factors such as historical return patterns for each asset class and forecasts for inflation. We review historical return patterns and other relevant financial factors for appropriateness and reasonableness and make modifications to eliminate certain effects when considered necessary. Our foreign benefit plan asset allocation at December 31, 2011, and our target asset allocation for the year 2012 are as follows:
 
Plan Asset Allocation for Foreign Plans and Other Post-Employment Obligations
 
%
 
Target Asset Allocation 2012
Actual % of 2011 Plan Assets
Target Asset Allocation 2011
Actual % of 2010 Plan Assets
Asset category
 
 
 
 
Equity
12
10
12
11
Fixed income
66
60
81
80
Real estate
3
3
3
5
Insurance policies
1
1
0
0
Cash and other assets
18
26
4
4
Total
100
100
100
100
 
 
The investment strategies for foreign benefit plans vary according to the respective conditions in the country in which the benefit plans are situated. Generally, a long-term investment horizon has been adopted for all major foreign benefit plans. Our policy is to invest in a risk-diversified portfolio consisting of a mix of assets within the above target asset allocation range.
 
Our expected contribution in 2012 is €1 million for domestic defined benefit pension plans and €47 million for foreign defined benefit pension plans, all of which is expected to be paid in cash.
The amounts for the current year and four preceding years of pension obligation, plan assets, funded status, and experience adjustments are as follows:
 
Pension Obligation, Plan Assets, Funded Status and Experience Adjustments
 
€ millions
Domestic Plans
Foreign Plans
Other Post-Employment Plans
Total
 
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
Defined benefit obligation
462
416
346
314
274
457
439
343
306
287
27
25
20
18
13
946
880
709
638
574
Liability experience adjustments
11
13
-13
-10
-37
0
29
31
-45
0
-1
2
0
0
-1
10
44
18
-55
-38
Plan assets
460
414
345
314
272
387
386
311
261
311
5
4
4
3
0
852
804
660
578
583
Asset experience adjustments
9
9
-18
-8
-30
-7
-1
28
-99
-10
0
0
0
0
0
2
8
10
-107
-40
Funded status
-2
-2
-1
0
-2
-70
-53
-32
-45
24
-22
-21
-16
-15
-13
-94
-76
-49
-60
9
 
 
Defined Contribution Plan/State Plans
We also maintain domestic and foreign defined contribution plans. Amounts contributed by us under such plans are based on a percentage of the employees' salaries or the amount of contributions made by employees. Furthermore in Germany, as well as in some other countries, we make contributions to public pension plans that are operated by national or local government or a similar institution. The expenses of defined contribution plans and state plans for the years 2011, 2010, and 2009, were as follows:
 
Total Expense of Defined Contribution Plans and State Plans
 
 
€ millions
2011
2010
2009
Defined contribution plans
151
136
132
State plans
244
215
183
Total expense
395
351
315
 
 
 
(19b) Other Provisions
Changes in other provisions over the reporting year were as follows:
 
Other Provisions
 
€ millions
Balance 1/1/2011
Addition
Accretion
Acqui-sition
Utili-zation
Release
Currency Impact
Balance 12/31/2011
Employee-related provisions
 
 
 
 
 
 
 
 
Provisions for share-based compensation
147
49
0
0
-70
-9
2
119
Other employee-related provisions
167
93
0
0
-63
-8
0
189
Customer-related provisions
50
83
0
0
-56
-29
0
48
Litigation-related provisions
 
 
 
 
 
 
 
 
TomorrowNow litigation
997
32
0
0
-25
-757
-16
231
Other litigation-related provisions
43
26
0
0
-13
-5
2
53
Other provisions
97
17
5
5
-25
-8
1
92
Total Other Provisions
1,501
300
5
5
-252
-816
-11
732
Thereof current
1,285
 
 
 
 
 
 
537
Thereof non-current
216
 
 
 
 
 
 
195
 
 
For more information about our share-based compensation programs, see Note (28).
 
Other employee-related provisions primarily comprise obligations for time credits, severance payments, jubilee expenses, and semiretirement. While most of these employee-related provisions could be claimed within the next 12 months, we do not expect the related cash flows within this time period.
 
Customer-related provisions include performance obligations as well as expected contract losses. The associated cash outflows are substantially short-term in nature.
 
Litigation-related provisions relate primarily to the litigation matters described in Note (24). We have established provisions taking into account the facts of each case. The timing of the cash outflows associated with legal claims cannot be reasonably determined in all cases. The legal and litigation-related provisions assumed in connection with the 2011 acquisitions are measured at provisional values. For details see Note (3c). The estimate regarding the provision for the TomorrowNow litigation was adjusted substantially following the judgment of the court in September 2011. For more details, see Note (24).  
 
Other provisions relate mainly to decommissioning, restoration and similar liabilities associated with leased facilities, onerous contracts, warranty obligations and restructuring provisions. The associated cash outflows for decommissioning, restoration and similar liabilities, which are typically long-term in nature, are generally expected to occur at the dates of exit of the facilities to which they relate. The utilization of onerous leases depends on the terms of the underlying lease contract. The related outflow for the remaining other provisions is of short-term nature.