UBI Banca Group

14.3.2 Post-employment benefits and defined benefit plans
14.3.2.1 Recognition criteria
Following the reform of supplementary pensions pursuant to Legislative Decree No. 252/2005,
portions of post-employment benefit funds maturing from 1st January 2007 constitute a
“defined benefit plan”.
The liability relating to those portions is measured on the basis of the contributions due
without the application of any actuarial methods.
However, post-employment benefits maturing up until 31st December 2006 continue to
constitute a “post employment benefit” belonging to the “defined benefit plan” series and as
such require the amount of the obligation to be determined on an actuarial basis and to be
discounted to present values because the debt may be extinguished a long time after the
employees have rendered the relative service.
The amount is accounted for as a liability amounting to:
(a) the present value of the defined benefit obligation as at the reporting date;
(b) plus any actuarial gains (less any actuarial losses) recognised in a separate reserve in
equity;
(c) less any pension costs relating to past service rendered not yet recognised;
(d) less the fair value at the reporting date of any assets at the service of the plan.
14.3.2.2 Measurement criteria
As concerns the accounting treatment for actuarial gains/losses, the UBI Group has opted for
direct recognition of these items within fair value reserves in equity.
“Actuarial gains/losses” comprise adjustments arising from the reformulation of previous
actuarial assumptions as a result of actual experience or from changes in the actuarial
assumptions themselves.
The “Projected Unit Credit Method” is used to calculate the present value. This considers each
single period of service as giving rise to an additional unit of severance payment and therefore
measures each unit separately to arrive at the final obligation. This additional unit is obtained
by dividing the total expected service by the number of years that have passed from the time
service commenced until the expected payment date. Application of the method involves
making projections of future payments based on historical analysis of statistics and of the
demographic curve and discounting these flows on the basis of market interest rates. The rate
used for discounting to present value is calculated as the average of the swap, bid and ask
rates at the measurement date appropriately interpolated for intermediate maturity dates.
14.3.3 Stock Option/Stock granting
Stock option and stock granting plans are defined as personnel remuneration schemes where
the service rendered by an employee (or a third party) is remunerated by using equity
instruments (including options on shares).
The cost of these transactions is measured at the fair value of equity instruments granted and
is recognised in the income statement under item 180 “Administrative expenses a) personnel
expenses” on a straight line basis over the original life of the plan
The fair value determined relates to the equity instruments granted at the time of grant and
takes account of market prices, if available, and the terms and conditions upon which the
instruments were granted.
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