4.11
11. Other non-current liabilities

11.1 Provisions

  Warranties Other provisions Total 2021 Total 2020
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 10,527 4,828 15,355 11,037
Provisions used during the year -5,901 -4,074 -9,974 -5,871
Provisions made during the year 6,882 1,008 7,891 11,449
Provisions reversed during the year -1,672 -82 -1,754 -1,256
Currency translation differences -12 1 -11 -4
Balance at 31 December 9,824 1,682 11,506 15,355
         
Non-current 4,545 11 4,557 4,507
Current 5,279 1,671 6,950 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 is 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 recognized as finance cost.

A provision for restructuring is recognized 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.

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

  2021 2020
  € x 1,000 € x 1,000
Net defined benefit asset 8,816 21,096
Total employee benefit asset 8,816 21,096
     
Net defined benefit obligation 6,115 6,748
Other long-term employee benefits 1,957 1,909
Total employee benefit liabilities 8,072 8,657

 

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 partly appointed by the company. Pension benefits are related to the member’s salary and their length of pensionable service. Since December 2002, the defined benefit section of this pension plan has been closed to future accrual but active members retain a link to their salary increases. 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 plan exposes the company to actuarial risks such as market risk, interest rate risk and inflation risk. The plan does not expose the company to any unusual plan-specific risk. The most recent triennial valuation of the plan was completed as at 5 April 2020 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 plan’s investment strategy in 2020 was to invest all of the plan’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 trustees, in cooperation with the company, have sought to protect the good financial position of the plan and to remove the main remaining unhedged longevity risk. The trustees decided in 2021 to invest a significant part of the plan’s assets in an insurance contract with the Legal & General Assurance Society that pays cashflows to the plan to cover benefit payments as they fall due. This insurance contract is held in the trustees’ name and the company is still legally responsible for the benefits in the highly unlikely event that the insurer is not able to make a payment to the plan. The acquisition price for this insurance contract is € 14 million higher than the fair value of the defined benefit obligation it covers. The difference is the compensation demanded by the insurer to cover the actuarial and other risks of the plan and is recognized as loss on plan assets in other comprehensive income. This transaction is not considered a settlement, because it does not transfer any legal or constructive obligations from the company.

Guaranteed Minimum Pension (GMP-) equalization United Kingdom
In line with the 2018 Lloyds judgement which ruled that GMPs must be equalized 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 equalization is changed to something other than 2.2%, the impact must be recognized 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 purpose of the actuarial valuations are based on the following weighted averages:

  UK plan Other UK plan Other
  2021 2021 2020 2020
Discount rate 1.8% 1.2% 1.3% 0.7%
Expected rates of salary increase 2.0% 1.1% 2.0% 0.9%
Inflation pre 2030 2.7% 2.4% 2.3% 2.3%
Inflation post 2030 3.1% 2.4% 2.7% 2.3%
Average longevity at retirement age for current pensioners (years):        
Males 21.3 20.2 21.5 20.1
Females 24.3 23.3 24.6 23.3
Average longevity at retirement age for current employees (years):        
Males 23.0 22.7 23.5 22.6
Females 26.1 25.2 26.7 25.3

 

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

  2021 2020
  € x 1,000 € x 1,000
Current service cost 77 39
Past service cost and losses (gains) from settlements -8 45
Administration expense 146 192
Net interest expense (income) -243 -371
Total expenses (income) defined benefit plans -28 -95

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

  2021 2020
  € 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) 18,871 -7,599
Actuarial losses (gains) from changes in demographic assumptions -59 220
Actuarial losses (gains) arising from changes in financial assumptions -3,376 6,137
Actuarial losses (gains) arising from experience adjustments -1,998 2,082
Adjustments for restrictions on the defined benefit asset - -
Prior year(s) presentation adjustment - -
Remeasurement net defined benefit plans 13,438 840

 

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

  UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
At 31 December 2020      
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 obligations - 6,748 6,748
Funded status -20,986 6,638 -14,348
Restrictions on assets recognized - - -
Net defined benefit obligation (asset) at 31 December 2020 -20,986 6,638 -14,348
       
At 31 December 2021      
Present value of funded pension obligation 72,318 69 72,387
Minus: Fair value of plan assets -81,007 -196 -81,203
Deficit/ (surplus) -8,689 -127 -8,816
Present value of unfunded defined benefit obligation - 6,115 6,115
Funded status -8,689 5,988 -2,701
Restrictions on assets recognized - - -
Net defined benefit obligation (asset) at 31 December 2021 -8,689 5,988 -2,701

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 2020 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
Current service cost - 77 77
Past service costs, including (gains)/losses from curtailments - -8 -8
Interest cost 1,016 48 1,064
Actuarial (gains) and losses arising from changes in demographic assumptions -64 5 -59
Actuarial (gains) and losses arising from changes in financial assumptions -2,943 -433 -3,376
Actuarial (gains) and losses arising from experience adjustments -1,935 -49 -1,984
Liabilities extinguished on settlements - - -
Exchange differences on foreign plans 5,690 60 5,750
Benefits paid -3,604 -308 -3,912
Defined benefit obligation at 31 December 2021 72,318 6,184 78,502

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 2020 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
Interest income 1,306 1 1,307
Remeasurement gain (loss):      
Return on plan assets (excluding amounts included in net interest expense) -18,873 2 -18,871
Plan assets distributed on settlements - - -
Contributions from the employer - 25 25
Administration expense -146 - -146
Assets distributed on settlements - - -
Exchange differences on foreign plans 7,179 15 7,194
Benefits paid -3,604 - -3,604
Fair value of the plan assets at 31 December 2021 81,007 196 81,203

 

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

  2021 2020
  € x 1,000 € x 1,000
Liability driven investment 4,151 76,889
Corporate bonds - 12,126
Cash and cash equivalents 7,409 6,283
Insurance policy 69,643 -
Total debt securities and equity investments 81,203 95,298

 

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 2021 (2020: 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:

  2021 2020
  € x 1 million € x 1 million
Impact on defined benefit obligation    
Discount rate + 0.1% -1.1 -1.1
Discount rate - 0.1% 1.1 1.1
Expected salary growth + 0.1% 0.4 0.4
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 € 20 thousand to the defined benefit plans in 2022. 

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 recognized 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 recognized 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 recognized 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 recognized 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 recognized immediately in profit or loss. Accell Group recognizes 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 recognized in profit or loss in the period in which they arise.

11.3 Deferred revenue

  2021 2020
  € x 1,000 € x 1,000
Non-current 2,209 1,529
Current 11,348 2,226
Balance at 31 December 13,557 3,755

 

In 2021, deferred revenue consists mainly of advance payments but also includes receipts in respect of extended warranty to be realized in the coming five years (2020: vice versa).

 

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.