AMBEV S.A. | CIK:0001565025 | 3

  • Filed: 3/19/2018
  • Entity registrant name: AMBEV S.A. (CIK: 0001565025)
  • Generator: Thunderdome
  • SEC filing page: http://www.sec.gov/Archives/edgar/data/1565025/000129281418000752/0001292814-18-000752-index.htm
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    • ifrs-full:DisclosureOfEmployeeBenefitsExplanatory

    23.
    EMPLOYEE BENEFITS
     
    The Company sponsors pension plans to defined benefit to employees in Brazil and subsidiaries located in the Dominican Republic, Panama, Uruguay, Bolivia and Canada based on employees' salaries and length of service. The entities are governed by local regulations and practices of each individual country as well as the relationship with the Company’s pension funds and their composition.
     
    Ambev provides post-employment benefits, including pension benefits and medical and dental care. Post-employment benefits are classified as either defined contribution or defined benefit plans.
     
    The defined benefit plans and the other post-employment benefits are
    not
    granted to new retirees.
     
    Defined contribution plans
     
    These plans are funded by the participants and the sponsor, and are managed by administered pension funds. During
    2017,
    the Company contributed
    R$18.9
    (
    R$25.3
    during
    2016
    ) to these funds, which were recorded as an expense. Once the contributions have been paid, the Company has
    no
    further payment obligations.
     
    Defined benefit plans
     
    At
    December 31, 2017
    the net liability for defined benefit plans consists of the following:
     
        2017     2016     2015  
    Present value of funded obligations    
    (5,027.7
    		 )    
    (4,592.1
    		 )    
    (4,646.4
    		 )
    Fair value of plan assets    
    4,006.2
    		      
    3,845.2
    		      
    3,781.4
    		  
    Present value of net obligations    
    (1,021.5
    		 )    
    (746.9
    		 )    
    (865.0
    		 )
    Present value of unfunded obligations    
    (757.4
    		 )    
    (741.3
    		 )    
    (756.6
    		 )
    Present value of net obligations    
    (1,778.9
    		 )    
    (1,488.2
    		 )    
    (1,621.6
    		 )
    Asset ceiling    
    (368.4
    		 )    
    (532.2
    		 )    
    (534.5
    		 )
    Net liability    
    (2,147.3
    		 )    
    (2,020.4
    		 )    
    (2,156.1
    		 )
    Other long term employee benefits    
    (105.0
    		 )    
    (83.8
    		 )    
    (57.2
    		 )
    Total employee benefits    
    (2,252.3
    		 )    
    (2,104.2
    		 )    
    (2,213.3
    		 )
    Employee benefits amount in the balance sheet:                        
    Liabilities    
    (2,310.7
    		 )    
    (2,137.7
    		 )    
    (2,221.9
    		 )
    Assets    
    58.4
    		      
    33.5
    		      
    8.6
    		  
    Net liabilities    
    (2,252.3
    		 )    
    (2,104.2
    		 )    
    (2,213.3
    		 )
     
    The changes in the present value of the defined benefit obligations were as follows:
     
        2017     2016     2015  
    Defined benefit obligation at January 1
    st
    		    
    (5,333.4
    		 )    
    (5,403.0
    		 )    
    (4,808.0
    		 )
    Acquisitions through exchange transaction of shareholdings    
    -
    		      
    (67.3
    		 )    
    -
    		  
    Service cost    
    (38.2
    		 )    
    (43.1
    		 )    
    (42.4
    		 )
    Interest cost    
    (321.5
    		 )    
    (320.5
    		 )    
    (308.2
    		 )
    Gains and (losses) on settlements or reductions in benefits    
    3.9
    		      
    2.2
    		      
    1.1
    		  
    Contributions by plan participants    
    (4.1
    		 )    
    (5.2
    		 )    
    (5.2
    		 )
    Actuarial gains and (losses) - geographical assumptions    
    77.3
    		      
    (20.1
    		 )    
    -
    		  
    Actuarial gains and (losses) - financial assumptions    
    (140.3
    		 )    
    (321.1
    		 )    
    182.5
    		  
    Experience adjustment    
    (115.7
    		 )    
    (182.8
    		 )    
    (10.6
    		 )
    Reclassifications    
    (7.5
    		 )    
    11.1
    		      
    -
    		  
    Exchange differences    
    (306.5
    		 )    
    599.6
    		      
    (805.1
    		 )
    Benefits paid    
    400.9
    		      
    416.8
    		      
    392.9
    		  
    Defined benefit obligation at December, 31    
    (5,785.1
    		 )    
    (5,333.4
    		 )    
    (5,403.0
    		 )
     
    The present value of funded obligations include
    R$762.0
    (
    R$683.4
    in
    2016
    and
    R$494.1
    in
    2015
    ) of
    two
    health care plans for which the benefits are provided directly by Fundação Zerrenner. Fundação Zerrenner is a legally distinct entity whose main goal is to provide the Company’s current and retired employees and managers with health care and dental assistance, technical and superior education courses, maintaining facilities for assisting and helping elderly people, among other things, through direct initiatives or through financial assistance agreements with other entities.
     
    The changes in the fair value of plan assets are as follows:
     
        2017     2016     2015  
    Fair value of plan assets at January 1
    st
    		    
    3,845.2
    		      
    3,781.4
    		      
    3,550.1
    		  
    Interest Income    
    273.3
    		      
    274.7
    		      
    259.5
    		  
    Administrative costs    
    (3.4
    		 )    
    (3.7
    		 )    
    (3.4
    		 )
    Expected Return excluding interest income    
    (64.8
    		 )    
    269.8
    		      
    (173.2
    		 )
    Acquisition through business combination    
    -
    		      
    73.5
    		      
    -
    		  
    Contributions by employer    
    183.2
    		      
    175.9
    		      
    107.6
    		  
    Contributions by plan participants    
    4.5
    		      
    5.6
    		      
    5.2
    		  
    Exchange differences    
    166.8
    		      
    (315.3
    		 )    
    428.5
    		  
    Benefits paid excluding costs of administration    
    (398.6
    		 )    
    (416.7
    		 )    
    (392.9
    		 )
    Fair value of plan assets at December, 31    
    4,006.2
    		      
    3,845.2
    		      
    3,781.4
    		  
     
    The real return on plan assets generated in
    2017
    was a gain of
    R$208.5
    (gain of
    R$544.5
    in
    2016
    and
    R$86.3
    in
    2015
    ).
     
    At
    December 31, 2017,
    the Company recorded
    R$58.4
    (
    R$33.5
    at
    December 31, 2016)
    up to the asset ceiling
    not
    exceeding the present value of future benefits.
     
    The changes in the asset ceiling
    not
    exceeding the present value of future benefits are as follow:
     
        2017     2016     2015  
    Asset ceiling impact at January 1
    st
    		    
    33.5
    		      
    8.6
    		      
    12.8
    		  
    Acquisitions through exchange transaction of shareholdings    
    -
    		      
    10.4
    		      
    -
    		  
    Interest income/(expenses)    
    2.8
    		      
    1.3
    		      
    1.1
    		  
    Change in asset ceiling excluding amounts included in interest income/(expenses)    
    8.8
    		      
    15.8
    		      
    (5.3
    		 )
    Effect of exchange rate fluctuations    
    0.9
    		      
    (2.6
    		 )    
    -
    		  
    Others    
    12.4
    		      
    -
    		      
    -
    		  
    Asset ceiling impact at December 31    
    58.4
    		      
    33.5
    		      
    8.6
    		  
     
    The income/(expense) recognized in the income statement with regard to defined benefit plans is detailed as follows:
     
        2017     2016     2015  
    Current service costs    
    (38.2
    		 )    
    (43.1
    		 )    
    (42.4
    		 )
    Administrative costs    
    (3.4
    		 )    
    (3.7
    		 )    
    (3.4
    		 )
    (Gains) losses on settlements and curtailments    
    4.2
    		      
    0.7
    		      
    1.1
    		  
    Income from operations    
    (37.4
    		 )    
    (46.1
    		 )    
    (44.7
    		 )
    Financial cost    
    (101.3
    		 )    
    (105.6
    		 )    
    (97.6
    		 )
    Total expense for employee benefits    
    (138.7
    		 )    
    (151.7
    		 )    
    (142.3
    		 )
     
    The employee benefit revenue/(expenses) are included in the following line items in the income statement:
     
        2017     2016     2015  
    Cost of sales    
    (22.3
    		 )    
    (24.5
    		 )    
    (19.3
    		 )
    Sales and marketing expenses    
    (5.0
    		 )    
    (9.5
    		 )    
    (7.9
    		 )
    Administrative expense    
    (10.1
    		 )    
    (10.2
    		 )    
    (17.5
    		 )
    Financial expenses    
    (101.3
    		 )    
    (105.6
    		 )    
    (97.6
    		 )
    Exceptional items    
    -
    		      
    (1.9
    		 )    
    -
    		  
         
    (138.7
    		 )    
    (151.7
    		 )    
    (142.3
    		 )
     
    The assumptions used in the calculation of the obligations are as follows:
     
       
    2017
    (i)
    		  
    2016
    (i)
    		  
    2015
    (i)
    Discount rate  
    3.6%
    to
    10.6%
    		  
    3.9%
    to
    10.5%
    		  
    4.1%
    to
    12.1%
    Inflation  
    2.0%
    to
    5.0%
    		  
    2.0%
    to
    5.2%
    		  
    2.0%
    to
    5.2%
    Future salary increases  
    1.0%
    to
    8.7%
    		  
    1.0%
    to
    8.5%
    		  
    1.0%
    to
    8.8%
    Future pension increases  
    2.0%
    to
    4.3%
    		  
    2.0%
    to
    4.5%
    		  
    2.0%
    to
    4.5%
    Medical cost trend rate  
    4.5%
    to
    7.9%
    3.8%
    a
    8.2%
    		  
    4.5%
    to
    8.2%
       
    p.a. reducing to 7.9%
    		  
    p.a. reducing to 8.2%
    		  
    p.a. reducing to 8.2%
    Dental claims trend rate  
     
    4.3%
    		  
     
    4.5%
    		  
     
    4.5%
                             
    Life expectation for an over 65 years old male  
    83
    to
    87
    		  
    80
    to
    86
    		  
    85
    to
    70
    Life expectation for an over 65 years old female  
    86
    to
    89
    		  
    83
    to
    89
    		  
    88
    to
    71
     
    (i) Includes assumptions in Latin America – North, Latin America – South and Canada.
     
    Through its defined benefit pension plans and post-employment medical plans, the Company is exposed to a number of risks, the most significant are detailed below:
     
    Asset volatility
     
    The plans liabilities are calculated using a discount rate set with reference to high quality corporate yields; if plan assets underperform this yield, the Company’s net defined benefit obligation
    may
    increase. Most of the Company’s funded plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plans mature, the Company usually reduces the level of investment risk by investing more in assets that better match the liabilities.
     
    Changes in bond yields
     
    A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
     
    Inflation risk
     
    Some of the Company’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation could potentially increase the Company’s net benefit obligation.
     
    Life expectancy
     
    The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.
     
    Investment strategy
     
    In case of funded plans, the Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency.
     
    The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
     
            2017     2016     2015  
    In millions of Brazilian Reais   Change in assumption   Increase in assumption     Decrease in assumption     Increase in assumption     Decrease in assumption     Increase in assumption     Decrease in assumption  
    Medical cost trend rate  
    100 bases points
    		    
    (119.7
    		 )    
    102.3
    		      
    (104.7
    		 )    
    90.2
    		      
    (77.5
    		 )    
    67.4
    		  
    Discount rate  
    50 bases points
    		    
    289.7
    		      
    (309.2
    		 )    
    292.6
    		      
    (311.5
    		 )    
    262.5
    		      
    (280.1
    		 )
    Future salary increase  
    50 bases points
    		    
    (12.9
    		 )    
    12.3
    		      
    (16.6
    		 )    
    15.3
    		      
    (13.3
    		 )    
    12.5
    		  
    Longevity  
    One year
    		    
    (180.6
    		 )    
    176.5
    		      
    (175.9
    		 )    
    172.9
    		      
    (135.1
    		 )    
    131.1
    		  
     
    The data presented in these tables are purely hypothetical and are based on changes in individual assumptions holding all other assumptions constant: economic conditions and changes therein always affect the other assumptions at the same time and its effects are
    not
    linear. Therefore, the above information is
    not
    necessarily a reasonable representation of future results.
     
    The plans assets at
    December 31, 2017,
    2016
    and
    2015
    consist of the following:
     
        2017     2016     2015  
        Rated     Unrated     Total     Rated     Unrated     Total     Rated     Unrated     Total  
    Government bonds    
    50
    		 %    
    -
    		      
    50
    		 %    
    41
    		 %    
    -
    		      
    41
    		 %    
    29
    		 %    
    -
    		      
    29
    		 %
    Corporate bonds    
    7
    		 %    
    -
    		      
    7
    		 %    
    13
    		 %    
    -
    		      
    13
    		 %    
    23
    		 %    
    -
    		      
    23
    		 %
    Equity instruments    
    14
    		 %    
    -
    		      
    14
    		 %    
    18
    		 %    
    -
    		      
    18
    		 %    
    15
    		 %    
    -
    		      
    15
    		 %
    Property    
    -
    		      
    -
    		      
    -
    		      
    -
    		      
    -
    		      
    -
    		      
    -
    		      
    1
    		 %    
    1
    		 %
    Cash    
    -
    		      
    -
    		      
    -
    		      
    1
    		 %    
    -
    		      
    1
    		 %    
    -
    		      
    -
    		      
    -
    		  
    Others    
    29
    		 %    
    -
    		      
    29
    		 %    
    27
    		 %    
    -
    		      
    27
    		 %    
    32
    		 %    
    -
    		      
    32
    		 %
     
    The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated share in the total investment portfolio.
     
    Ambev expects to contribute approximately
    R$229.3
    to its defined benefit plans in
    2018.