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(18) Provisions

 

Provisions

€ millions   2016   2015
Current   Non-Current   Total   Current   Non-Current   Total
Pension plans and similar obligations (see Note (18a))   0   140   140   0   117   117
Other provisions (see Note (18b))   183   77   260   299   63   362
Total   183   217   400   299   180   479

 

(18a) Pension Plans and Similar Obligations

Defined Benefit Plans

The measurement dates for our domestic and foreign benefit plans are December 31.

Present Value of the Defined Benefit Obligations (DBO) and the Fair Value of the Plan Assets

€ millions Domestic Plans Foreign Plans Other Post-Employment Plans Total
2016 2015 2016 2015 2016 2015 2016 2015
Present value of the DBO 854 724 369 333 98 82 1,321 1,139
Thereof fully or partially funded plans 854 724 324 293 74 61 1,252 1,078
Thereof unfunded plans 0 0 45 40 24 21 69 61
Fair value of the plan assets 843 716 290 265 48 42 1,181 1,023
Net defined benefit liability (asset) 11 8 79 69 50 40 140 117
Amounts recognized in the Consolidated Statement of Financial Position:
Non-current provisions −11 −8 −79 −69 −50 −40 −140 −117
Total −11 −8 −79 −69 −50 −40 −140 −117

€789 million (2015: €664 million) of the present value of the DBO of our domestic plans relate to plans that provide for lump-sum payments not based on final salary, and €316 million (2015: €287 million) of the present value of the DBO of our foreign plans relate to plans that provide for annuity payments not based on final salary.

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

Percent Domestic Plans Foreign Plans Other Post-Employment Plans
2016 2015 2014 2016 2015 2014 2016 2015 2014
Discount rate 2.1 2.7 2.2 0.6 0.7 1.1 4.0 4.0 4.2
Future salary increases 2.5 2.5 2.5 1.7 1.7 1.7 6.0 6.3 3.8
Future pension increases 2.0 2.0 2.0 0 0 0 0.0 0.0 0
Employee turnover 2.0 2.0 2.0 10.3 10.3 10.1 8.6 8.7 1.3
Inflation 2.0 2.0 0 1.4 1.4 1.3 1.1 1.0 1.3

The sensitivity analysis table shows how the present value of all defined benefit obligations would have been influenced by reasonably possible changes to above actuarial assumptions. The sensitivity analysis table presented below considers change in one actuarial assumption at a time, holding all other actuarial assumptions constant. A reasonably possible change in actuarial assumptions of 50 basis points in either direction, except for the discount rate assumption, would not materially influence the present value of all defined benefit obligations.

Sensitivity Analysis

€ millions Domestic Plans Foreign Plans Other Post-Employment Plans Total
2016 2015 2014 2016 2015 2014 2016 2015 2014 2016 2015 2014
Present value of all defined benefit obligations if:
Discount rate was 50 basis points higher 800 678 725 344 311 259 93 79 44 1,237 1,068 1,028
Discount rate was 50 basis points lower 913 775 840 398 359 296 101 87 49 1,412 1,221 1,185

Total Expense of Defined Benefit Pension Plans

€ millions Domestic Plans Foreign Plans Other Post-Employment Plans Total
2016 2015 2014 2016 2015 2014 2016 2015 2014 2016 2015 2014
Current service cost 7 10 3 21 21 16 10 9 6 38 40 25
Interest expense 19 17 22 3 3 5 3 3 2 25 23 29
Interest income −20 −17 −23 −2 −3 −5 −1 −2 −1 −23 −22 −29
Past service cost 0 0 0 0 0 0 0 0 0 0 0 0
Total expense 6 10 3 22 21 16 12 10 7 40 41 26
Actual return on plan assets 97 −76 133 1 0 10 2 2 1 100 −74 144

Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies.

Our investment strategies for foreign benefit plans vary according to the conditions in the country in which the respective benefit plans are situated. Generally, a long-term investment horizon has been adopted for all major foreign benefit plans. Although our policy is to invest in a risk-diversified portfolio consisting of a mix of assets, both the defined benefit obligation and plan assets can fluctuate over time, which exposes the Group to actuarial and market (investment) risks. Depending on the statutory requirements in each country, it might be necessary to reduce any underfunding by addition of liquid assets.

Plan Asset Allocation

€ millions 2016 2015
Quoted in an Active Market Not Quoted in an Active Market Quoted in an Active Market Not Quoted in an Active Market
Asset category
Equity investments 118 0 93 0
Corporate bonds 90 0 101 0
Government bonds 5 0 5 0
Real estate 49 0 43 0
Insurance policies 0 864 0 736
Cash and cash equivalents 11 0 9 0
Others 44 0 36 0
Total 317 864 287 736

Our expected contribution in 2017 to our domestic and foreign defined benefit pension plans is immaterial. The weighted duration of our defined benefit plans amounted to 14 years as at December 31, 2016, and 14 years as at December 31, 2015.

Total future benefit payments from our defined benefit plans as at December 31, 2016, are expected to be €1,583 million (2015: €1,432 million). Eighty-two percent of this amount has maturities of over five years.

Maturity Analysis

€ millions Domestic Plans Foreign Plans Other Post-Employment Plans
2016 2015 2016 2015 2016 2015
Less than a year 25 19 26 26 8 2
Between 1 and 2 years 21 18 45 43 7 2
Between 2 and 5 years 70 65 69 63 20 8
Over 5 years 1,009 935 232 223 51 28
Total 1,125 1,037 372 355 86 40

Defined Contribution Plans/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 and some other countries, we make contributions to public pension plans that are operated by national or local government or a similar institution.

Total Expense of Defined Contribution Plans and State Plans

€ millions 2016 2015 2014
Defined contribution plans 234 218 188
State plans 484 429 360
Total expense 718 647 548

(18b) Other Provisions

Other Provisions

€ millions 1/1/
2016
Addition Accretion Utilization Release Currency Impact 12/31/
2016
Employee-related provisions 58 57 0 −39 −2 0 74
Customer-related provisions 61 34 0 −10 −1 3 87
Intellectual property-related provisions 11 7 0 −10 0 1 9
Restructuring provisions 184 41 0 −163 −13 0 49
Onerous contract provisions (other than from customer contracts) 15 0 1 −14 0 0 2
Other provisions 33 8 0 0 −2 0 39
Total other provisions 362 147 1 −236 −18 4 260
Thereof current 299 183
Thereof non-current 63 77

Customer-related provisions include, among others, disputes with individual customers. Intellectual property-related provisions relate to litigation matters. Both classes of provisions are described in Note (23).

For more information about our restructuring plans, see Note (6).

The cash outflows associated with employee-related restructuring costs are substantially short-term in nature.

Onerous contract provisions (other than from customer contracts) and other provisions comprise facility-related and supplier-related provisions. The timing of the associated cash outflows is dependent on the remaining term of the underlying lease and of the supplier contract.

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