4.11
Other non-current liabilities

4.11.1 Provisions

  Warranties Other provisions Total
  € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 2020
10,089
948
11,037
Provisions used during the year -5,006 -864 -5,871
Provisions made during the year 6,700 4,749 11,449
Provisions reversed during the year -1,251 -5 -1,256
Currency translation differences -4 - -4
Balance at 31 December 2020
10,527
4,828
15,355
 
Non-current 4,397 110 4,507
Current 6,130 4,718 10,848

 

Warranty provisions represent the estimated costs under warranty obligations for goods delivered and services rendered as at the reporting date. The provision for warranty obligations are expected to have a duration of between one and five years. Other provisions are primarily related to an environmental provision, restructuring provisions and a legal provision with a duration of less than one year. Accell Group does not form a provision for product liability, because this risk is insured.

Accounting estimates and judgements

Accell Group needs to make estimates to determine the likelihood and timing of potential cash outflows. On the product liability front, Accell Group judges that the chance of cash outflows are highly unlikely, but has nevertheless insured this risk, so no product liability provisions are deemed necessary. The estimates of warranty provisions are based on historical warranty information. For large restructurings, management assesses the timing of the costs to be incurred, which influences the classification as current or non-current liabilities.

Accounting policy

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

A provision for restructuring is recognised when a detailed and formal restructuring plan has been approved, and the restructuring has either commenced or has been announced publicly. Future operating losses are not provided for. The provision includes the benefit commitments in connection with early retirement and redundancy schemes.

4.11.2 Contingent liabilities

     
  2020 2019
  € x 1,000 € x 1,000
Non-current - -
Current - 2,889
Balance at 31 December
-
2,889

 

The fair value of the contingent liability arrangement of Velosophy stood at nil at 31 December 2020 (2019: € 2.9 million, which is paid in the first quarter of 2020 and includes the unwind of discount). 

Accounting estimates

The fair value of the contingent liability arrangement is estimated by applying the income approach using significant not observable market inputs.

Accounting policy

The contingent liability in respect of the Velosophy acquisition is currently the only non-derivative financial liability at fair value through profit and loss.

4.11.3 Defined benefit pension plans and other long-term employee benefits

     
  2020 2019
  € x 1,000 € x 1,000
Net defined benefit asset -21,096 -22,383
Total employee benefit asset
-21,096
-22,383
Net defined benefit obligation 6,748 6,394
Other long-term employee benefits 1,909 2,324
Total employee benefit liabilities
8,657
8,718

 

Defined benefit plan United Kingdom

Accell Group funds defined benefits for qualifying employees. The main defined benefit plan is the plan in the United Kingdom (UK), which accounts for approximately 92% of the defined benefit obligation and for more than 99% of the plan assets. The UK plan is subject to UK laws and is administered by a separate fund that is legally separated from the UK group company. The trustees of this fund are appointed by the company. Pension benefits are related to the member’s final salary at retirement and their length of service. Since December 2002, the defined benefit section of this pension scheme has been closed to future accrual. On the basis of the deed and rules of the UK plan the company has an unconditional right in the form of refunds when there is a surplus and the fund has no further obligations or in case when there is a surplus at the time when the plan is wound up.

The UK scheme exposes the company to actuarial risks such as market risk, interest rate risk and inflation risk. The scheme does not expose the company to any unusual scheme-specific risk. Over the year, the most recent triennial valuation of the scheme was completed which revealed a surplus measured on the Trustees’ prudent funding target. As such the Trustees chose to adopt a low-risk investment policy to protect this surplus from market movements. The scheme’s revised investment strategy is to invest all of the scheme’s assets in matching assets, with approximately 12% of asset invested in corporate bonds, with the remaining 88% in liability driven investment (LDI) and cash designed to hedge against movements in the liabilities due to changes in interest rates and inflation expectations. The cash assets are being used to meet the scheme's liquidity requirements and naturally de-leverages the LDI portfolio. This strategy reflects the scheme’s risk profile and the Trustees’ and the Company’s attitude to risks. 

GMP-equalisation United Kingdom
In line with the 2018 Lloyds judgement which ruled that GMPs must be equalised across males and females, 2.2% was added to the liabilities on the measurement date. This is consistent with last year's approach. If the allowance for GMP equalisation is changed to something other than 2.2%, the impact must be recognised through other comprehensive income. 

Other defined benefit plans

In addition, Accell Group sponsors a funded defined benefit plan for qualified employees in Taiwan, a fixed unfunded defined benefit plan in Germany and an unfunded defined benefit plan in Hong Kong. Accell Group's defined benefit plans no longer involve contributions from employees, as the plans are mainly frozen.

The actuarial calculations were carried out at 31 December by actuaries from certified actuarial firms. The principal assumptions used for the purposes of the actuarial valuations are based on the following weighted averages:

  UK plan Other UK plan Other
  2020 2020 2019 2019
Discount rate 1.3% 0.7% 1.9% 0.8%
Expected rates of salary increase 2.0% 0.9% 2.0% 0.1%
Inflation pre 2030 2.3% 2.3% 2.4% 1.6%
Inflation post 2030 2.7% 2.3% 2.4% 1.6%
Average longevity at retirement age for current pensioners (years):        
Males 21.5 20.1 21.4 20.1
Females 24.6 23.3 24.4 23.4
Average longevity at retirement age for current employees (years):        
Males 23.5 22.6 23.3 22.7
Females 26.7 25.3 26.5 25.6

 

Amounts recognised in the income statement in respect of these defined benefit plans are as follows:

     
  2020 2019
  € x 1,000 € x 1,000
Current service cost 39 31
Past service cost and losses (gains) from settlements 45 -
Administration expense 192 16
Net interest expense (income) -371 -424
Total expenses defined benefit plans
-95
-377

Amounts recognised in other comprehensive income in respect of these defined benefit plans are as follows:

     
  2020 2019
  € x 1,000 € x 1,000
Remeasurement of the net defined benefit obligation (asset):    
Return on plan assets (excluding amounts included in net interest expenses) -7,599 -7,628
Actuarial losses (gains) from changes in demographic assumptions 220 1,647
Actuarial losses (gains) arising from changes in financial assumptions 6,137 5,668
Actuarial losses (gains) arising from experience adjustments 2,082 148
Adjustments for restrictions on the defined benefit asset - -
Prior year(s) presentation adjustment - -
Remeasurement net defined benefit plans
840
-165

 

The defined benefit obligation and fair value of plan assets are specified as follows:

At 31 December 2019 UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
Present value of funded pension obligation 72,585 81 72,666
Minus: Fair value of plan assets -94,926 -125 -95,051
Deficit/ (surplus)
-22,341
-44
-22,385
Present value of unfunded defined benefit obligations - 6,394 6,394
Funded status
-22,341
6,350
-15,991
Restrictions on assets recognised - - -
Net defined benefit obligation (asset) at 31 December 2019
-22,341
6,350
-15,991
 
At 31 December 2020 UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
Present value of funded pension obligation 74,159 43 74,202
Minus: Fair value of plan assets -95,145 -153 -95,298
Deficit/ (surplus)
-20,986
-110
-21,096
Present value of unfunded defined benefit obligation - 6,748 6,748
Funded status
-20,986
6,638
-14,348
Restrictions on assets recognised - - -
Net defined benefit obligation (asset) at 31 December 2020
-20,986
6,638
-14,348

 

The movement in the present value of the defined benefit obligation was as follows:

  UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 2019 63,943 6,524 70,467
Current service cost - 31 31
Past service costs, including (gains)/losses from curtailments - - -
Interest cost 1,654 103 1,757
Actuarial (gains) and losses arising from changes in demographic assumptions 1,642 5 1,647
Actuarial (gains) and losses arising from changes in financial assumptions 5,042 626 5,668
Actuarial (gains) and losses arising from experience adjustments - 148 148
Liabilities extinguished on settlements - - -
Exchange differences on foreign plans 4,077 24 4,101
Benefits paid -3,773 -986 -4,759
Defined benefit obligation at 31 December 2019
72,585
6,475
79,060
Current service cost - 39 39
Past service costs, including (gains)/losses from curtailments 45 - 45
Interest cost 1,325 48 1,373
Actuarial (gains) and losses arising from changes in demographic assumptions 220 - 220
Actuarial (gains) and losses arising from changes in financial assumptions 5,554 583 6,137
Actuarial (gains) and losses arising from experience adjustments 2,138 -56 2,082
Liabilities extinguished on settlements - - -
Exchange differences on foreign plans -3,981 -13 -3,994
Benefits paid -3,727 -285 -4,012
Defined benefit obligation at 31 December 2020
74,159
6,791
80,950

 

The movement in the fair value of the plan assets was as follows:

  UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 2019 83,587 314 83,901
Interest income 2,178 3 2,181
Remeasurement gain (loss):      
Return on plan assets (excluding amounts included in net interest expense) 7,613 15 7,628
Plan assets distributed on settlements - - -
Contributions from the employer 125 14 139
Administration expense -16 - -16
Assets distributed on settlements - - -
Exchange differences on foreign plans 5,212 12 5,224
Benefits paid -3,773 -233 -4,006
Fair value of the plan assets at 31 December 2019
94,926
125
95,051
Interest income 1,743 1 1,744
Remeasurement gain (loss): - - -
Return on plan assets (excluding amounts included in net interest expense) 7,592 7 7,599
Plan assets distributed on settlements - - -
Contributions from the employer 104 22 126
Administration expense -192 - -192
Assets distributed on settlements - - -
Exchange differences on foreign plans -5,301 -2 -5,303
Benefits paid -3,727 - -3,727
Fair value of the plan assets at 31 December 2020
95,145
153
95,298

 

The fair value of the plan assets can be specified as follows:

     
  2020 2019
  € x 1,000 € x 1,000
Liability driven investment 76,889 20,597
Corporate bonds 12,126 12,151
Property bonds - 12,564
Absolute return bonds - 22,259
Diversified growth funds - 20,582
Cash and cash equivalents 6,283 6,898
Total debt securities and equity investments
95,298
95,051

 

The fair values of the above equity investments and debt securities are determined on the basis of quoted market prices in active markets. The average duration of the defined benefit obligation stood at 17 years at 31 December 2020 (2019: 17 years).

Significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate and expected salary increases. The sensitivity analyses below have been determined on the basis of reasonably possible changes of the respective assumptions at the end of the reporting period. The interdependence of inputs was not taken into account in the analyses:

     
  2020 2019
  € x 1 million € x 1 million
Impact on defined benefit obligation
 
 
Discount rate + 0.1% -1.1 -0.9
Discount rate - 0.1% 1.1 1.0
Expected salary growth + 0.1% 0.4 0.5
Expected salary growth - 0.1% -0.5 -0.5

 

The sensitivity analyses are prepared at the end of the reporting period using the same methods as applied in the defined benefit obligation in the balance sheet. The sensitivity analyses may not be representative of the actual change in the defined benefit obligation. It is unlikely that the changes in the assumptions would occur in isolation from each other, as some of the assumptions are correlated.

Accell Group expects to contribute € 0.1 million to the defined benefit plans in 2021.

Other long-term employee benefits

Other long-term employee benefits relate to the provision for future anniversary bonuses and resignation payments in some countries. The provision is based on contractual obligations and assumptions with respect to expectations of death and resignation. The provision for deferred employee benefits is expected to have a duration of between one and five years. 

Accounting estimates and judgements

To make the actuarial calculations for the defined benefit plans, Accell Group needs to make use of assumptions regarding discount rates, future pension increases and life expectancy as described in this note. The actuarial calculations are made by external actuaries on the basis of inputs from observable market data, such as corporate bond returns and yield curves to determine the discount rates used, mortality tables to determine life expectancy and inflation numbers to determine future salary and pension growth assumptions.

Accounting policies

Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Defined benefit plans

Accell Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for Accell Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses and the return on plan assets (excluding interest), are recognised immediately in other comprehensive income. Accell Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. Accell Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

Other long-term employee benefits

Accell Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.

4.11.4 Deferred revenue

     
  2020 2019
  € x 1,000 € x 1,000
Non-current 1,529 1,185
Current 2,226 486
Balance at
3,755
1,671

 

Deferred revenue consists mainly of receipts in respect of extended warranty to be realised in the coming five years and advance payments or unearned revenue.

Accounting policy

The extended warranty fee received from insurance companies (a fee per insurance contract sold) is taken to deferred revenue and released to profit or loss over the time of the committed warranty service period on a straight-line basis.

Advance payments and unearned revenue, are recorded as a liability, until the services have been rendered or products have been delivered.