Employee Benefits Liability
The Group operates post-employment and other long-term employee benefit schemes in accordance with the collective bargaining agreements, local regulations and practices. These plans cover a large portion of the Group’s employees and include benefits in the form of lump-sum post-employment payments, pensions, financial support to pensioners, jubilee payments to employees and pensioners, etc. These benefits generally depend on years of service, level of compensation and amount of benefit under the collective bargaining agreement. The Group pays the benefits when they fall due for payment. All employee benefit schemes are unfunded.
The following table summarises changes in the present value of the defined benefit obligation by country:
| Russia | USA | Others | TOTAL | |||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| At January 1 | 46 245 | 53 861 | 2 430 | 2 557 | 2 607 | 1 896 | 51 282 | 58 314 |
| Current service cost | 1 432 | 2 261 | 401 | 574 | 736 | 415 | 2 569 | 3 250 |
| Interest expense | 2 811 | 3 698 | 82 | 98 | 39 | 58 | 2 932 | 3 854 |
| Past service cost | (4 154) | (2 793) | – | – | 43 | – | (4 111) | (2 793) |
| Curtailment gain | – | – | (88) | (585) | – | – | (88) | (585) |
| Net benefit expense recognised in profit or loss | 89 | 3 166 | 395 | 87 | 818 | 473 | 1 302 | 3 726 |
| (Gains)/losses arising from changes in demographic assumptions | (1 009) | 1 794 | 3 | (3) | (373) | – | (1 379) | 1 791 |
| (Gains)/losses arising from changes in financial assumptions | (6 734) | (4 428) | 235 | (191) | (83) | 209 | (6 582) | (4 410) |
| Experience (gains)/losses | 1 458 | (698) | 6 | 9 | 13 | 40 | 1 477 | (649) |
| Actuarial (gains)/losses recognised in other comprehensive (income)/loss | (6 285) | (3 332) | 244 | (185) | (443) | 249 | (6 484) | (3 268) |
| Benefits paid | (3 051) | (3 675) | (1 076) | (29) | (131) | (119) | (4 258) | (3 823) |
| Exchange differences | (18 178) | (3 775) | – | – | (254) | 17 | (18 432) | (3 758) |
| Other | – | – | – | – | – | 91 | – | 91 |
| At December 31 | 18 820 | 46 245 | 1 993 | 2 430 | 2 597 | 2 607 | 23 410 | 51 282 |
| Short-term | 1 949 | 4 935 | 277 | 1 093 | 140 | 187 | 2 366 | 6 215 |
| Long-term | 16 871 | 41 310 | 1 716 | 1 337 | 2 457 | 2 420 | 21 044 | 45 067 |
Net benefit expense was recognised as cost of sales, general and administrative expenses and selling and distribution expenses in the income statement for the years ended December 31, 2014 and 2013. Actuarial gains/(losses) for post-employment benefits were recognised in other comprehensive income/(loss).
The principal actuarial assumptions used in determining the Group’s defined benefit obligations are shown below:
| Russia | USA | Others | ||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| Discount rate | 13,00% | 8,00% | 4,10% | 4,95% | 3,10% | 3,7%-3,8% |
| Inflation | 7,50% | 5,00% | – | – | 2,60% | 3,50% |
| Average long-term rate of compensation increase | 9,10% | 6,60% | 4,00% | 4,00% | 2,60% | 1,4%-2,1% |
| Turnover | Age-related curve depending on experience data for a year | Age-related curve depending on experience data for a year | Standard Crocker Sarason Termination Table T-11 | Standard Crocker Sarason Termination Table T-11 | 1,88%-5,44% | 1,0% |
A quantitative sensitivity analysis for significant assumptions as at December 31, 2014 is provided below:
| Russia | USA | Others | ||||||
| Volatility range | Effect on obligation increase/(decrease) | Effect on obligation increase/(decrease) | Effect on obligation increase/(decrease) | |||||
| Low | High | Low | High | Low | High | Low | High | |
| Discount rate | -1% | 1% | 1 600 | (1 422) | 131 | (113) | 128 | (110) |
| Inflation | -1% | 1% | (1 422) | 1 600 | – | – | (113) | 129 |
| Average long-term rate of compensation increase | -1% | 1% | (356) | 444 | (74) | 77 | (113) | 129 |
| Turnover | -3%–-1% | 1%-3% | 1 813 | (1 600) | 44 | (40) | 247 | (120) |