Annual Report - EDP

notes to the consolidated EDP and - Energias company de Portugal, financial S.A. statementsfor the Notes years to the ended Consolidated 31 december and Company 2012 Financial and Statements 2011for the years ended 31 December 2012 and 2011m) Accounts receivableAccounts receivable are initially recognised at fair value and subsequently measured at amortised cost less impairment losses and being presented in the statementof financial position net of impairment losses which are associated.Impairment losses are recorded based on the regular assessment of the existence of objective evidence of impairment resulting from doubtful accounts receivable asof the balance sheet date. Impairment losses are recognised in the income statement, being subsequently reversed through the income statement if the estimatedlosses decrease, in a later period.n) Employee benefitsPensionsSome EDP Group companies grant post-retirement benefits to employees under defined benefit and defined contribution plans, namely pension plans that grantretirement complementary benefits for age, disability and surviving pensions, as well as early retirement pensions.Defined benefit plansIn Portugal, the defined benefit plan is funded through a closed Pension Fund complemented by a specific provision. The Pension Fund covers the liabilities forretirement pension complements as well as for early retirement.In Brazil, Bandeirante has two defined benefit plans managed by the CESP Foundation, a closed complementary welfare entity with its own assets, segregated fromthose of its sponsors. Escelsa has a defined benefit plan that grants complementary benefits for retirement due to age, disability and survival pensions. Escelsa alsohas a special complementary benefit plan for retired employees who served in the brazilian army.The Group’s pension plans are defined benefit plans, since the criteria used to determine the amount of the pension to be received by employees on retirement isusually dependent on one or more factors such as age, years of service and salary level.In compliance with IFRS 1, the Group decided, on the transition date on 1 January 2004, to recognise the full amount of the deferred actuarial losses on that dateagainst reserves.The Group’s pension liability for each plan is calculated annually at the balance sheet date, by independent experts individually for each plan, using the projected unitcredit method. The discount rate used in the calculation is determined based on market interest rates of high quality corporate bonds denominated in the currency inwhich the benefits will be paid and that have similar maturity to the related pension liability.Actuarial gains and losses resulting from (i) differences between financial and actuarial assumptions used and actual amounts and (ii) changes in the actuarialassumptions, are recognised against equity, in accordance with the alternative method defined by IAS 19.The increase in past service costs arising from early retirements (retirements before the normal retirement age) is recognised in the income statement when incurred.The Group recognises as operational expenses, in the income statement, the current service cost and the effect of early retirements. Interest cost and estimated returnof the fund assets are recognized as financial results.The assets of the plan comply with the recognition criteria established by IFRIC 14 - IAS 19 and the minimum funding requirements established by law or by contract.Defined contribution plansIn Portugal, Spain and Brazil, some companies have defined contribution social benefit plans that complement those granted by the Social Security System, underwhich they pay an annual contribution to the plans, calculated in accordance with the rules established in each plan.Other benefitsMedical benefits and other plansIn Portugal and in Brazil some EDP Group companies provide medical benefits during retirement and early retirement, through complementary benefits to thoseprovided by the Social Security System. The medical benefits plans are classified as defined benefit plans, the liability being covered by provisions booked in theGroup’s statement of financial position. Measurement and recognition of the medical benefits liabilities are similar to those of the defined benefit plans pensionliabilities, explained above.Variable remuneration paid to employeesIn accordance with the by-laws of some Group companies, the shareholders approve in the Annual General Meeting a variable remuneration to be paid to themanagement and employees (bonus), following a proposal made by the Executive Board of Directors. The variable remuneration is charged to the income statementin the year to which it relates.184A World Full Of Energy