81 they are subject to provisions in accordance with IFRS 9. A financial guarantee contract is a contract requiring the issuer to make specific payments to reimburse the holder for a loss incurred due to a specific debtor's failure tomake apaymentwhendue, inaccordancewith the initial ormodified terms and conditions of a debt instrument. Financial guarantee contracts are initially measured at fair value and subsequently at the one of the following, whichever is greater: • theamount of the impairment for credit lossesdetermined in accordance with IFRS 9, or • the amount initially recognised less, if any, accumulated income recognised in accordance with the principles of IFRS 15 Revenue from Contracts with Customers. Provisions (IAS 37 and 19) CFM Indosuez Wealth Group identifies legal or implicit obligations resulting from a past event, in cases in which it is likely that an outflowof resources will be required to settle them, where the timing or amount are uncertain but of which a reliable estimate can be made. These estimates are discounted, where applicable, whenever there is amaterial impact. In respect of non-credit riskobligations, CFM IndosuezWealth Group has set up provisions that cover: • operational risks; • employee benefits; • performance risk on off-balance sheet commitments; • litigation and liability guarantees. • tax risks (excluding income tax); Commitments are established taking into account, in particular: • the modelled behaviour of the subscribers, using assumptions of changes in these behaviours, based on historical observations and whichmay not reflect actual future changes; • an estimate of the amount and duration of future borrowings based on historical long-termobservations; • thecurveof observable ratesonthemarket andreasonably anticipated changes in such rates. Theamount of the followingprovisionsmay alsobeestimated: • theprovision for operational risks, which although subject to analysis of proven risks, requires Management’s judgement to assess incident frequency and the potential financial impact; • provisions for legal risks resulting from Management’s best assessment, taking into account the information in its possession at the end of the financial year. Employee benefits (IAS 19) Employee benefits, in accordance with IAS 19, fall into four categories: • short-term benefits, such as wages, social security contributions, holidays, incentivebonuses, profit-sharing, and bonuses, are those expected to be paid within 12 months of the year in which the services were rendered; • retirement benefits, which are themselves classified into the two categories described below: defined benefit plans and defined contribution plans. • other long-termbenefits (long-service awards, bonuses and remuneration payable 12 months or more after the end of the financial period); • severance pay. Post-employment benefits Defined-benefit plans At each closing date, CFM IndosuezWealthGroupdetermines its retirement and similar benefits aswell as all the employee benefits granted in respect of defined benefit plans. In accordancewith IAS 19, these commitments are assessed based on a set of actuarial, financial and demographic assumptions, using the ProjectedUnit Creditmethod. Under thismethod, for each year of service by an employee, a cost is allocated corresponding to the rights accrued over the period. This cost is calculatedbasedon thediscounted future benefit. Calculations of costs related to pension benefits and other future employee benefits are based on assumptions made by Management regarding the discount rate, staff turnover rate and changes in salary and social security costs. (see note 7.4 “Retirement benefits – defined benefit plans”). Discount rates are determined based on the average term of the commitment, that is, the arithmetical average of the terms calculatedbetween the valuationdate and thepayment date, weighted by employee turnover assumptions. The underlying item used is the discount rate by reference to the iBoxx AA. index In accordance with IAS 19, the entity recognises all actuarial gains and losses in equity non-recyclable to income. Actuarial gains and losses consist of experience adjustments (differencebetweenwhatwas estimated andwhat happened) and the effect of changes in actuarial assumptions. The expected return on plan assets is determined using discount rates applied to measure the defined benefit obligation. The difference between the expected return and the actual return on plan assets is recognised in gains and losses recognised directly in non-recyclable equity. The amount of the provision is equal to: • the present value of the defined benefit obligation as of
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