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Allianz Annual Report 2013

of the well-defined planning and controlling processes. Important input factors for those calculations are the business plan, the esti- mate of the sustainable returns and eternal growth rates, as is further explainedinnote15.The­AllianzGroupalsoperformssensitivitytests with regard to key value drivers, such as projected long-term com- bined ratios or discount rates. Furthermore, the ­Allianz Group reviews market-based business transaction multiples where avail- able. This information is used to assess reasonableness since directly comparable market value information is not generally available. The ­Allianz Group believes that the controls over assessing the recover- ability of goodwill ensure both consistent and reliable results. DEFERRED TAX ASSETS As of 31 December 2013, the ­Allianz Group reported deferred tax assetsof€ 1,508 mn.Thedeferredtaxassetsbeforenettingwithdeferred tax liabilities amounted to € 15,555 mn. € 1,561 mn thereof resulted from tax losses which are carried forward to future periods.1 Deferred taxes are determined based on tax loss carry forwards, unused tax credits and on temporary differences between the ­Allianz Group’s carrying amounts of assets and liabilities in its consolidated balance sheet and their tax bases. Deferred tax assets are recognized only to the extent it is probable that sufficient future taxable income will be available for their realization. Assessments as to the recover- ability of deferred tax assets require the use of judgment regarding assumptions related to estimated future taxable profits. This includes the character and amounts of taxable future profits, the periods in which those profits are expected to occur as well as the availability of tax planning opportunities. The analysis and forecasting required in this process, and as a result the determination of the deferred tax assets, is performed for individual jurisdictions by qualified local tax and financial profession- als. Given the potential significance surrounding the underlying esti- mates and assumptions, Group-wide policies and procedures have been designed to ensure consistency and reliability around the recov- erability assessment process. Forecasted operating results are based upon approved business plans which are themselves subject to a well- defined process of control. As a matter of policy, especially strong evidence supporting the recognition of deferred tax assets is required if an entity has suffered a loss in either the current or preceding period. Recognition and recoverability of all significant deferred tax assetsarereviewedbytaxprofessionalsatGrouplevelandthe­Allianz Group Tax Committee. 2 1 Please refer to note 2 Summary of significant accounting policies and note 42 Income taxes for further details. 2 Please refer to note 2 Summary of significant accounting policies and note 47 Pensions and similar obliga- tions for further details. PENSION LIABILITIES AND SIMILAR OBLIGATIONS As of 31 December 2013, the ­Allianz Group reported a defined benefit obligationfordefinedbenefitplansof€ 19,110 mnwhichisoffsetbythe fair value of plan assets of € 11,668 mn.2 Liabilities for pension and similar obligations and related net pension expenses are determined in accordance with actuarial valu- ation models. These valuations rely on extensive assumptions. Key assumptions including discount rates, inflation rates, compensation increases,pensionincreasesandratesofmedicalcosttrendaredefined centrally at the ­Allianz Group level considering the circumstances in the particular countries. In order to ensure their thorough and con- sistentdetermination,allinputparametersarediscussedanddefined, taking into consideration economic developments, peer reviews, cur- rently available market and industry data. The discount rate assump- tions are determined by reference to yields of high-quality corporate bonds of appropriate duration and currency at the balance sheet date. In countries where there is no deep market in such bonds, mar- ket yields on government bonds are generally used as discount rates. Due to changing market and economic conditions, the underly- ing assumptions may differ from actual developments. Potential financial impacts from deviations in certain critical assumptions based on respective sensitivity analyses are disclosed in note 47. RESTRUCTURING PROVISIONS As of 31 December 2013, the ­Allianz Group reported a provision for restructuring programs of € 214 mn.3 Provisions for restructuring programs are recognized when the ­Allianz Group has a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out therestructuringbystartingtoimplementtheplanorbyannouncing its main features. The detailed formal plan of a restructuring pro- gram is based on several estimates and assumptions, such as the number of employees to be dismissed, amount of compensation pay- ments, impacts of onerous contracts, possibilities of sub-leases, tim- ing of the various steps of the program and in consequence timing of the expected cash flows. Generally, the subsidiaries, which are undertaking the restruc- turing program, set up a formal plan and determine all underlying estimates and assumptions. Therefore, it is the ­Allianz Group’s policy that the subsidiaries are responsible for an adequate planning pro- cess, controlling the execution of the program, and for the fulfillment of all requirements of IFRS. The respective documentation has to be submittedtothe­AllianzGroupAccountingandReportingdepartment, where qualified staff members review all restructuring programs. This includes a review of all estimates and assumptions, and an assessment of whether all requirements for setting up a restructuring provision are satisfied, including which cost components can be treated as restructuring charges. 3 Please refer to note 2 Summary of significant accounting policies and note 49 Restructuring plans for further details. Annual Report 2013    Allianz Group146

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