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108 being focused: being better
Payments from defined benefit plans depend on the length of service, age and salary of the
employee. Costs and obligations resulting from defined benefit pension plans are calculated on
the basis of actuarial appraisals using the projected unit credit method. This method sets the
service period of the employee in relation to the date of valuation, and includes estimated
future changes in salary.
Expenses for pensions for the fiscal years ending December 31, 2001 and December 31, 2002
were as follows:
2002 2001
‘000 euros ‘000 euros
Service cost 1,119 1,060
Interest charges 3,407 3,303
Amortization of actuarial profits (losses) 14 0
Total 4,540 4,363
The following table shows changes in benefit obligations recognized in the Consolidated
Financial Statements for fiscal years ending December 31, 2001 and December 31, 2002:
2002 2001
‘000 euros ‘000 euros
Projected benefit obligation at beginning of year 62,205 55,229
Service cost 1,119 1,060
Interest cost 3,407 3,303
Benefits paid (3,307) (3,312)
Actuarial (profit)/loss (1,107) 5,827
Retroactive plan amendments 358 0
Disposals and transfers 670 98
Projected benefit obligations at end of year 63,345 62,205
Unrecognized actuarial profit (loss) (4,718) (5,838)
Unrecognized charges from increases in benefits (341) 0
Recognized amount 58,286 56,367
The discount rates correspond approximately to the interest rate achievable from high-grade
fixed interest securities with the same maturity period on the date on which the benefit obligation
is calculated. This is 5.5 percent calculated for the Group (2001: 5.5 percent). Pension
benefit obligationss are calculated on the basis of an salary increase of 3 percent p.a. (2001:
2.8 percent).