Provisions for employee benefits and other non-current provisions

At 31 December 2013, this item totaled €142,741 thousand, an increase of €830 thousand over 31 December 2012, and consisted of the following:

(€ thousand)31 December 2012AccrualsUtilizationsOther changes31 December 2013
Defined benefit liability  14,576 1,929 -1,928 3,255 17,832
Other long-term employee benefits 1,640  - -407 -192 1,041
Provisions for stock option and stock grant plans 124,947 796 -2,138 -389 123,216
Other non-current provisions 748 - -96 - 652
Total provisions for employee benefits and other non-current provisions 141,911 2,725 -4,569 2,674 142,741

The Company provides employees post-employment benefits in the form of both defined contribution and defined benefit plans. In relation to defined contribution plans, the Company pays contributions to various publicly or privately-administered pension institutions on the basis of legal and contractual obligations, as well as on a voluntary basis. Once those contributions have been made, the Company has no further obligation. Liabilities for contributions due but unpaid at the balance sheet date are included under other debt (see Note 25). The cost for the period is based on actual services rendered by the employee and is recognized under personnel costs (see Note 5).

Defined benefit plans

Defined benefits plans primarily consist of post-employment benefits accruing to employees, former employees and the Chief Executive Officer under supplemental company or individual agreements. Those plans are unfunded.

Changes in those liabilities during the year were as follows: 

 Leaving entitlement (TFR)OtherTotal
(€ thousand)31 December 201331 December 201231 December 201331 December 201231 December 201331 December 2012
Balance at beginning of period 4,548 4,437 10,028 9,915 14,576 14,352
Included in income statement            
  • Current service cost
- - 1,724 947 1,724 947
  • Interest cost
67 112 138 186 205 298
Included in OCI            
  • Actuarial losses/(gains) attributable to demographic assumptions
8 - - - 8 -
  • Actuarial losses/(gains) attributable to financial assumptions
167 - 315 - 482 -
  • Other
1,253 1,419 (355) (753) 898 666
Benefits paid (1,656) (174) (272) (230) (1,928) (404)
Other changes 612 (1,246) 1,255 (37) 1,867 (1,283)
Defined benefit liability at 31 December 4,999 4,548 12,833 10,028 17,832 14,576

Current service costs for employees are recognized in the income statement under personnel costs (see Note 5) and for the Chief Executive Officer under other operating costs (see Note 6). The associated interest costs are recognized in the income statement under financial income/(expense) (see Note 7).

As defined benefit plan liabilities are measured on an actuarial basis, the recognized value of those liabilities is sensitive to the underlying assumptions. The principal assumptions used in calculation of trattamento di fine rapporto (leaving entitlement or “TFR” in Italy) are the discount rate, average rate of annual departures and maximum retirement age.

The discount rate used in measurement of the TFR liability is based on the current yield for investment grade fixed income securities of equivalent maturity and amount as the expected future payments. For 2013, the average discount rate, which reflected the estimated timing and amount of future plan payments, was 2.49%. The average duration of the TFR liability at year end was 4.39 years. The average annual rate of departures, based on the Group’s prior experience, was estimated at 8.30%. The maximum retirement age was based on current legislation.

Maintaining all other assumptions unchanged, a 100 basis point increase or decrease in the discount rate would result in a €197 thousand decrease or a €233 thousand increase, respectively, in the estimated value of the TFR liability.

The Company’s estimate of timing of future TFR payments is as follows: €1,213 thousand in 2014, €585 thousand in 2015, €420 thousand in 2016, €496 thousand in 2017, €364 thousand in 2018 and €1,545 thousand for 2019 through 2024.

Other long-term employee benefits

At 31 December 2013, this item totaled €1,041 thousand (€1,640 thousand at 31 December 2012). That amount represents benefits payable to employees who have completed a determined length of service based on a supplemental company agreement. Actuarial gains and losses on the associated liability are recognized in the income statement in the period in which they arise.

Provisions for stock option and stock grant plans

At 31 December 2013, this item totaled €123,216 thousand and represented the liability arising from the obligation, following the demerger of activities to Fiat Industrial S.p.A. in January 2011, to deliver Fiat Industrial S.p.A. (now CNH Industrial N.V.) common shares to service a portion of the Company’s stock option and stock grant plans.

Changes in provisions for stock option and stock grant plans for the year were as follows:

(€ thousand)31 December 2012Fair value adjustmentUtilizationsOther changes31 December 2013
Provisions for stock option and stock grant plans 124,947 796 (2,138) (389) 123,216

In accordance with IFRS 2 and IAS 39, these liabilities were recognized at fair value upon initial recognition. In relation to the 2004 and 2006 stock option plans for the CEO and the 2006 stock option plan for managers, the calculation of fair value assumes a strike price equivalent to the par value of Fiat Industrial shares at the balance sheet date. Subsequent to initial recognition, changes in fair value are recognized through the income statement. In 2013, changes in fair value resulted in recognition, through the income statement, of a €796 thousand increase in the liability with a corresponding increase in the value of the investment in CNH Industrial (see Note 11). Finally, utilizations during the year (€2,138 thousand) related to CNH Industrial shares sold following the exercise of 285,000 options under the November 2006 stock option plan for managers.

Other non-current provisions

At 31 December 2013, other non-current provisions totaled €652 thousand (€748 thousand at 31 December 2012) and mainly related to future amounts to be paid to employees who left the Company in previous years under a long‑term benefit program which bridges the period prior to retirement.

During 2012, changes in provisions for employee benefits and other non-current provisions were as follows:

(€ thousand)1 January 2012AccrualsUtilizationsOther changes31 December 2012
Defined benefit liability 14,352 1,245 (404) (617) 14,576
Other long-term employee benefits 922 603 (220) 335 1,640
Provisions for stock option and stock grant plans 121,604 30,292 (26,500) (449) 124,947
Other non-current provisions 929 - (181) - 748
Total provisions for employee benefits and other non-current provisions 137,807 32,140 (27,305) (731) 141,911