Employee Retirement Provisions for Central_European

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Central European Distribution (CEDC)

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CEDC » Topics » Employee Retirement Provisions

This excerpt taken from the CEDC 8-K filed Jul 10, 2009.

Employee Retirement Provisions

The Company’s employees are entitled to retirement payments and in some cases payments for long-service (“jubilee awards”) and accordingly the Company provides for the current value of the liability related to these benefits. A provision is calculated based on the terms set in the collective labor agreement. The amount of the provision for retirement bonuses depends on the age of employees and the pre-retirement time of work for the Company and typically equals one month’s salary.

The Company does not create a specific fund designated for these payments and all payments related to the benefits are charged to the accrued liability. The provision for the employees’ benefits is calculated annually using the projected unit method and any losses or gains resulting from the valuation are immediately recognized in the income statement.

The Company also contributes to State and privately managed defined contribution plans. Contributions to defined contribution plans are charged to the income statement in the period in which they are incurred.

This excerpt taken from the CEDC 10-K filed Jun 29, 2009.

Employee Retirement Provisions

Wages, salaries, contributions to state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits (such as health services) which vest or accumulate are accrued in the year in which the associated services are rendered by the employees of the Company.

The Company contributes to the Russian Federation state pension fund as well as social insurance, medical insurance, and unemployment funds on behalf of its employees. The Company has no other program of post retirement benefits to its employees and thus has no future liability for such payments. These contributions, being calculated on a sliding scale at a rate between 2% and 26% of gross salary are expensed as incurred. For the period of May 23, 2008 to December 31, 2008 these contributions totaled RUR 3,972.

These excerpts taken from the CEDC 10-K filed Mar 2, 2009.

Employee Retirement Provisions

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The Company’s employees are entitled to retirement payments and in some cases payments for long-service (“jubilee awards”) and accordingly
the Company provides for the current value of the liability related to these benefits. A provision is calculated based on the terms set in the collective labor agreement. The amount of the provision for retirement bonuses depends on the age of
employees and the pre-retirement time of work for the Company and typically equals one months salary.

The Company does not create a
specific fund designated for these payments and all payments related to the benefits are charged to the accrued liability. The provision for the employees’ benefits is calculated annually using the projected unit method and any losses or gains
resulting from the valuation are immediately recognized in the income statement.

The Company also contributes to State and privately
managed defined contribution plans. Contributions to defined contribution plans are charged to the income statement in the period in which they are incurred.

SIZE="2">Employee Stock-Based Compensation

As of January 1, 2006, the Company adopted SFAS No. 123(R)
“Share-Based Payment” requiring the recognition of compensation expense in the Condensed Consolidated Statements of Income related to the fair value of its employee share-based options. SFAS No. 123(R) revises SFAS No. 123
“Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees”. SFAS No. 123(R) is supplemented by SEC Staff Accounting Bulletin (“SAB”) No. 107
“Share-Based Payment”. SAB No. 107 expresses the SEC staff’s views regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations including the valuation of share-based payments arrangements.

The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective vesting periods,
net of estimated forfeitures. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated.

FACE="Times New Roman" SIZE="2">SFAS No. 123(R) “Share-Based Payment” requires the recognition of compensation expense in the Consolidated Statements of Income related to the fair value of employee share-based options. Determining the
fair value of share-based awards at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the expected dividends. Judgment is also required in
estimating the amount of share-based awards expected to be forfeited prior to vesting. If actual forfeitures differ significantly from these estimates, share-based compensation expense could be materially impacted. Prior to adopting SFAS
No. 123(R), the Company applied Accounting Principles Board (“APB”) Opinion No. 25, and related Interpretations, in accounting for its stock-based compensation plans. All employee stock options were granted at or above the grant
date market price. Accordingly, no compensation cost was recognized for fixed stock option grants in prior periods.

The Company’s
2007 Stock Incentive Plan (“Incentive Plan”) provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to directors, executives, and other employees (“employees”) of the
Company and to non-employee service providers of the Company. Following a shareholder resolution in April 2003 and the stock splits of May 2003, May 2004 and June 2006, the Incentive Plan authorizes, and the Company has reserved for future
issuance, up to 1,397,333 shares of Common Stock (subject to an anti-dilution adjustment in the event of a stock split, re-capitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the
Incentive Plan.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center">NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

FACE="Times New Roman" SIZE="2">Amounts in tables expressed in thousands, except per share information

The option exercise price for stock options granted under the Incentive Plan may not be less than
fair market value but in some cases may be in excess of the closing price of the Common Stock on the date of grant. The Company uses the stock option price based on the closing price of the Common Stock on the day before the date of grant if such
price is not materially different than the opening price of the Common Stock on the day of the grant. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement.
Payment for the shares must be in cash, which must be received by the Company prior to any shares being issued. Stock options granted to directors and officers as part of an employee employment contract vest after 2 years. Stock options granted to
general employees as part of a loyalty program vest after three years. The Incentive Plan was approved by CEDC shareholders during the annual shareholders meeting on April 30, 2007 to replace the Company’s 1997 Stock Incentive Plan (the
“Old Stock Incentive Plan”), which expired in November 2007. The Stock Incentive Plan will expire in November 2017. The terms and conditions of the Stock Incentive Plan are substantially similar to those of the Old Stock Incentive Plan.

Before January 1, 2006 CEDC, the holding company, realized net operating losses and therefore an excess tax benefit (windfall)
resulting from the exercise of the awards and a related credit to Additional Paid-in Capital (APIC) of $2.2 million was not recorded in the Company’s books. The excess tax benefits and the credit to APIC for the windfall should not be recorded
until the deduction reduces income taxes payable on the basis that cash tax savings have not occurred. The Company will recognize the windfall upon realization.

FACE="Times New Roman" SIZE="2">See Note 13 for more information regarding stock-based compensation, including pro forma information required under SFAS No. 123 for periods prior to Fiscal 2006.

STYLE="margin-top:18px;margin-bottom:0px">Derivative Financial Instruments

The Company
uses derivative financial instruments, including interest rate swaps. Derivative financial instruments are initially recognized in the balance sheet at cost and are subsequently remeasured at their fair value. Changes in the fair value of derivative
financial instruments are recognized periodically in either income or in shareholders’ equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it
qualifies as a fair value hedge or a cash flow hedge.

Generally, changes in fair values of derivative financial instruments accounted for
as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks. Changes in fair values of derivative financial instruments not qualifying as hedges are
reported in income. At the inception of a transaction the Company documents the relationship between hedging instruments and hedged items, as well as its risk management objective and the strategy for undertaking various hedge transactions. This
process includes linking all derivatives designated to specific firm commitments or forecasted transactions. The Company also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivative financial
instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

SIZE="2">Comprehensive Income/(Loss)

Comprehensive income/(loss) is defined as all changes in equity during a period except
those resulting from investments by owners and distributions to owners. Comprehensive income includes net income adjusted by, among other items, foreign currency translation adjustments. The translation losses/gains on the re-measurements from
foreign currencies (primarily the Polish Zloty) to US dollars are classified separately as a component of accumulated other comprehensive income included in stockholders’ equity.

SIZE="1">

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center">NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

FACE="Times New Roman" SIZE="2">Amounts in tables expressed in thousands, except per share information

As of December 31, 2008, the Polish zloty exchange rate used to translate the balance sheet
weakened as compared to the exchange rate as of December 31, 2007, and as a result a loss to comprehensive income was recognized. Additionally, translation gains and losses with respect to long-term subordinated inter-company loans with the
parent company are charged to other comprehensive income. No deferred tax benefit has been recorded on the comprehensive income in regard to the long-term inter-company transactions with the parent company, as the repayment of any equity investment
is not anticipated in the foreseeable future.

This excerpt taken from the CEDC 10-K filed Feb 29, 2008.

Employee Retirement Provisions

This excerpt taken from the CEDC 10-K filed Mar 15, 2007.

Employee Retirement Provisions

This excerpt taken from the CEDC 10-K filed Mar 14, 2006.

Employee Retirement Provisions

The Company’s employees are entitled to retirement payment and in some cases payments for long-service (“jubilee awards”) and accordingly the Company provides for the current value of the liability related to these benefits. A provision is calculated based on the terms set in the collective labor agreement. The amount of the provision for retirement bonuses depends on the age of employees and the pre-retirement time of work for the Company and equals from 1 to 8 times the monthly salary.

The Company does not create a specific fund designated for these payments and all payments related to the benefits are charged to the income statement. The provision for the employees’ benefits is calculated annually using the projected unit method and any losses or gains resulting from the valuation are immediately recognized in the income statement.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amounts in columns expressed in thousands

This excerpt taken from the CEDC 8-K filed Oct 17, 2005.

Employee Retirement Provisions

Under Polish Labor Laws, the Company is required to provide each employee reaching their 60^th (for women) or 65^th (for men) birthday while employed by the Company with a bonus of one month’s salary. The Company expenses these amounts when incurred as they do not represent a material amount in aggregate. Retirements benefits in Poland are generally paid by the State and are financed by taxes paid by employees currently.

F-7

BOTAPOL HOLDING B.V.

NOTES TO FINANCIAL STATEMENTS

Amounts in columns expressed in thousands of U.S. dollars

This excerpt taken from the CEDC 10-K filed Mar 15, 2005.

Employee Retirement Provisions

Under Polish labor laws, the Company is required to provide each employee reaching her 60^th birthday if the employee is a women and his 65^th birthday if the employee is a man while employed by the Company with a bonus of one month salary. The Company expenses these amounts when incurred as they do not represent a material amount in aggregate. Retirements benefits in Poland are generally paid by the State and are financed by taxes paid by employees currently.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amounts in columns expressed in thousands

EXCERPTS ON THIS PAGE:

8-K	Jul 10, 2009

10-K	Jun 29, 2009

10-K (2 sections)	Mar 2, 2009

10-K	Feb 29, 2008

10-K	Mar 15, 2007

10-K	Mar 14, 2006

8-K	Oct 17, 2005

10-K	Mar 15, 2005

Central European Distribution (CEDC)

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