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Allianz Annual Report 2012

note 47. The census date for the primary pension plans is OctoberorNovember,withanysignificantchangesthrough 31 December taken into account. The ­Allianz Group applies the corridor approach. For each individual defined benefit pension plan, the ­Allianz Group recognizes a portion of its actuarial gains and losses as an income or expense if the net cumulative unrecognized ac- tuarial gains or losses at the end of the previous reporting period exceeded the greater of: a) 10 % of the defined benefit obligation at that date, or b) 10 % of the fair value of any plan assets at that date. Any unrecognized actuarial net gain or loss exceeding the greater of these two values is generally recognized as an income or expense in the consolidated income statements over the expected average remaining working lives of the employees participating in the plans. Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained. SHARE-BASED COMPENSATION PLANS The share-based compensation plans of the ­Allianz Group are classified as either equity settled or cash settled plans. Equity settled plans are measured at fair value on the grant date and recognized as an expense, with a corresponding increasetoshareholders’equity,overthevestingperiod.Eq- uity settled plans include a best estimate of the number of equityinstrumentsthatareexpectedtovestindetermining the amount of expense to be recognized. For cash settled plans, the ­Allianz Group accrues the fair value of the award as a compensation expense over the vesting period. Upon vesting, any change in the fair value of any unexercised awards is also recognized as a compensation expense. RESTRUCTURING PLANS Provisions for restructuring plans are recognized when the ­Allianz Group has a detailed formal plan for the restructur- ing and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or by announcing its main features. The detailed formalplanincludesthebusinessconcerned,approximate number of employees who will be compensated for termi- nating their services, the expenses to be incurred and the time period over which the plan will be implemented. The detailed plan must be communicated such that those affect- ed have an expectation that the plan will be implemented. INCOME AND EXPENSES FROM FULLY CONSOLI- DATED PRIVATE EQUITY INVESTMENTS All of the income and expenses from fully consolidated pri- vate equity investments are presented in separate income and expense line items. Revenue from fully consolidated private equity investments is recognized upon customer acceptance of goods delivered and when services have been rendered. INCOME TAXES Income tax expense consists of current taxes on taxable income actually charged to the individual ­Allianz Group companies and changes in deferred tax assets and liabili- ties. Expense and income from interest and penalties to or from tax authorities are included in current taxes. The cal- culation of deferred taxes is based on tax loss carry for- wards, unused tax credits and on temporary differences between the ­Allianz Group’s carrying amounts of assets or liabilities in its consolidated balance sheet and their tax bases. The tax rates used for the calculation of deferred taxes are the local rates applicable in the countries con- cerned; changes to tax rates which have been substantive- ly enacted prior to or as of the consolidated balance sheet date are taken into account. Deferred tax assets on losses carried forward are recognized only to the extent it is prob- able that sufficient future taxable income will be available for their realization. Please refer to note 3, where the processes and controls for ensuring an appropriate use of estimates and assumptions are explained. LEASES Payments made under operating leases to the lessor are charged to administrative expenses using the straight-line method over the period of the lease. When an operating lease is terminated before the lease period has expired, any penalty is recognized in full as an expense at the time when such termination takes place. PENSIONS AND SIMILAR OBLIGATIONS Contributionstodefinedcontributionplansarerecognized as an expense when employees have rendered services en- titling them to the contributions. For defined benefit plans, the ­Allianz Group uses the pro- jected unit credit actuarial method to determine the pres- ent value of its defined benefit plans and the related service cost and, where applicable, past service cost. The principal assumptions used by the ­Allianz Group are included in Annual Report 2012    Allianz Group D Consolidated Financial Statements 219 Consolidated Balance Sheets 220 Consolidated Income Statements 221 Consolidated Statements of Comprehensive Income 222 Consolidated Statements of Changes in Equity 223 Consolidated Statements of Cash Flows 226 Notes to the Consolidated Financial Statements 243