Note 2 - Critical estimates and assessment concerning the use of accounting principles

When it prepares the consolidated accounts the management team makes estimates, discretionary assessments and assumptions which influence the application of accounting principles. This accordingly affects recognised amounts for assets, liabilities, revenues and expenses. Last year’s annual accounts give a closer explanation of significant estimates and assumptions in Note 3 Critical estimates and assessments concerning the use of accounting principles.

Sparebank1 SMN Group has one pension arrangements; defined contribution plan. For a further description of the pension scheme, see note 24 in the 2017 annual report.

The group’s pension liabilities are accounted for under IAS 19R. Estimate variances are therefore directly reflected in equity capital and are presented under other comprehensive income.

It was decided to terminate the defined benefit scheme at a board meeting on 21 October 2016. Employees on this scheme transferred to the defined contribution scheme from 1 January 2017, and received a paid-up policy showing rights accumulated under the defined benefit scheme. Paid-up policies are managed by the pension fund, which has been a paid-up pension fund as from 1 January 2017. A framework agreement has been established between SpareBank 1 SMN and the pension fund which covers funding, asset management etc. In view of the responsibility still held by SpareBank 1 SMN, future liabilities will need to be incorporated in the accounts. The board of the pension fund is required to be composed of representatives from the Group and participants in the pension schemes in accordance with the articles of association of the pension fund.

A new calculation of the Group’s pension liabilities has been carried out as per 31 December 2018:

Actuarial assumptions 31 Dec 2018 1 January 2018 31 Dec 2017
Discount rate 2.60% 2.40% 2.40%
Expected rate of return on plan assets 2.60% 2.40% 2.40%
Expected future wage and salary growth 2.25% 2.25% 2.25%
Expected adjustment on basic amount (G) 2.25% 2.25% 2.25%
Expected increase in current pension 0.00 % 0.00 % 0.00%
Employers contribution  19.10% 19.10% 19.10%
Demographic assumptions:      
Mortality base table  K2013 BE    
Disability  IR73    
Voluntary exit  2 % to 50 year, 0 % after 50 year
Movement in net pension liability in the balance sheet Group (NOKm)  Funded Unfunded Total
Net pension liability in the balance sheet 1.1 -171 24 -147
OCI accounting 1 Jan 0 - 0
OCI accounting 31 December -18 -2 -19
Net defined-benefit costs in profit and loss account -4 2 -2
Paid in pension premium, defined-benefit schemes 0 - 0
Paid in pension premium, defined-benefit plan                               - -3 -3
Net pension liability in the balance sheet 31 December 2018 -193 21 -172


Net pension liability in the balance sheet Group (NOKm)  31 Dec 2018 31 Dec 2017
Net present value of pension liabilities in funded schemes 628 651
Estimated value of pension assets -803 -802
Net pension liability in the balance sheet before employer's contribution -175 -151
Employers contribution 3 4
Net pension liability in the balance sheet -172 -147
Pension cost Group (NOKm)  2018  2017
Present value of pension accumulated in the year 1 1
Net interest income -4 -5
Net pension cost related to defined plans, incl unfunded pension commitment -3 -4
Employer's contribution subject to accrual accounting 0 0
Cost of defined contribution pension and early retirement pension scheme 98 83
Total pension cost for the period 96 79

Investment held for sale
SpareBank 1 SMN's strategy is that ownership duse to defaulted exposures should at the outset be of brief duration, normally not longer than one year. Investments are recorded at fair value in the Parent Bank's accounts, and is classified as investment held for sale.

Assets and liabilities related to the property in Søndre Gate 4-10 in Trondheim City Centre (SpareBank 1 Kvartalet AS) has been  reclassified as held for sale from Q4 2017 based on the approval from management and board of Directors for selling the property, in addition to the  progress made in the sale process  which makes it highly probable that the  sale will be completed in the coming 12 months.

SpareBank 1 SMN accepted a bid at Søndre gate no. 4-10 in Trondheim city centre at November 9, 2017. SpareBank 1 SMN and its subsidiaries will lease back about 70 per cent of the overall area on a 15 year lease with the option of a lease extension. Estimated gross annual rental in 2018 amounts to NOK 36.4 million. The gross property value underlying the bid is NOK 755 million and provided SpareBank 1 SMN with a net gain after an estimated tax rebate and transaction costs of NOK 144 million. The transaction was completed in 2Q 2018. 

2018 (NOKm) Assets Liabilities Revenue Expenses Profit Ownership
Mavi XV AS Group 43 1 5 -1 5 100 %
Søndre gate 4-10 AS -  - 144 - 144 100 %
Total Held for sale 43 1 148 -1 149  
© SpareBank 1 SMN