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The benefits under defined benefit plans mainly depend on the employee’s length of service, age
and salary. The costs and obligations resulting from defined benefit plans are calculated on the
basis of actuarial reports, applying the projected unit credit method. This method sets the past
service of the employee in relation to the date of valuation, and therefore includes estimates
with regard to future salary trends. The reports as of December 31, 2004 include the following
assumptions:
in % 2004 2003
Discount rate 5.5 5.5
Rate of salary increases 3.0 3.0
The discount rate applied roughly approximates the interest rate achievable as of the valuation
date on top quality fixed-interest securities with the same maturity period. The annual rate of
salary increases is used to calculate the pension benefit obligations.
The components of pension cost for the years ended December 31, 2004 and 2003 were
as follows:
‘000 euros 2004 2003
Service cost 599 959
Interest cost 3,206 3,267
Amortisation of net actuarial gains (losses) 28 30
Amortisation of prior service cost 127 341
Total 3,960 4,597
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