Washington, D.C. 20549
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2015, 2014 AND 2013
1. |
DESCRIPTION OF THE PLAN |
The Procter & Gamble Ireland Employees Share Ownership Plan (1998) (the "Plan") is a stock ownership plan sponsored by The Procter & Gamble Company ("Company"). The following brief description is provided for general information purposes only. Participants should refer to the Plan agreement for more complete information.
General - The Plan is a share purchase plan established by Procter & Gamble to provide a means for eligible Irish employees to tax efficiently purchase shares of the Company. The Plan is administered by Mercer Limited who were appointed by the Trustees of the Plan and who hold the Plan assets on behalf of the Trustees of the Plan.
Eligibility - Employees eligible to participate in the Plan included all regular employees of participating subsidiaries of the Company (Note 7) with the exception of employees considered to be an executive, officer, director, or a 10% stockholder of the Company and employees eligible for another savings plan sponsored by the Company and maintained in the United States, Canada, or Puerto Rico. Eligible employees can enrol in the Plan on the first day of each month and on the initial participation date for each participating subsidiary.
Contributions - Employees can contribute up to 2.5% of their base salary. The participating Procter & Gamble companies (Note 7) match all contributions made by employees in full.
Distributions and Withdrawals - Participants may withdraw shares from the Plan at any time subject to the Plan rules.
Participant Accounts - Individual accounts are maintained for each Plan participant. Each participant's account is credited with the participant's contribution, the participating Procter & Gamble companies' (Note 7) matching contribution and allocations of Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances as defined. The benefit to which a participant is entitled is limited to the shares that can be provided from the participant's account.
Vesting - Participants are immediately vested in their contributions, the participating Procter & Gamble companies matching contributions and earnings.
Investments - Participants are only permitted to invest in the Company common stock. Any dividends on shares of Company common stock are separately payable to participants in accordance with the Plan agreement.
2. |
SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and Uncertainties - The Plan invests in Company common stock which represents a concentration in investments. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the value of the participants' account balances and the amounts reported in the financial statements.
Investment Valuation and Income Recognition - The Plan's investment in Company common stock is stated at fair value, which is based on quoted market prices and is translated into Euros at the rate of exchange at the period end date. Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date, net of any U.S. withholding taxes. Realized gains and losses are based upon the average cost method.
Net Appreciation / (Depreciation) in Fair Value of Investments - Realized and unrealized appreciation / (depreciation) in fair value of investments is based on the difference between the fair value of the assets at the beginning of the year, or at the time of purchase for assets purchased during the year, and the related fair value on the day investments are sold with respect to realized appreciation / (depreciation), or on the last day of the year for unrealized appreciation / (depreciation).
Cash at Bank and In Hand - Amounts shown as cash at bank and in hand are uninvested funds held that are to be invested in Company common stock in the following month.
Expenses of the Plan - Investment management expenses and all other fees and expenses are reimbursed by the participating Procter & Gamble companies (Note 7).
3. |
FAIR VALUE MEASUREMENT |
ASC 820, Fair Value Measures and Disclosures establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows:
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Level 1
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Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.
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Level 2
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Inputs to the valuation methodology include
• quoted prices for similar assets or liabilities in active markets;
• quoted prices for identical or similar assets or liabilities in inactive markets;
• inputs other than quoted prices that are observable for the asset or liability;
• inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
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Level 3
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Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
All investments are measured at quoted prices in the active market and are classified as Level 1 assets as of June 30, 2015 and 2014.
The Plan's investment in Company common stock experienced net appreciation / (depreciation) in value as follows for the years ended June 30, 2015, 2014, and 2013:
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2015
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2014
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2013
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€
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€
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€
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The Procter & Gamble Company common stock:
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Net appreciation/ (depreciation)
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593,471
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(73,933
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)
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626,917
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The realized gain on sales of company common stock for the years ended June 30, 2015, 2014 and 2013 was determined using an average cost method as follows:
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2015
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2014
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2013
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€
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€
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€
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Proceeds on sales of shares
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522,866
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299,023
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424,840
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Cost
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393,035
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294,589
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382,939
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Realized Gain on sales of shares
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129,831
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4,434
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41,901
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Distributions payable represent dividends and proceeds from disposals owed to participants and were €42,798 and €35,787 at June 30, 2015 and 2014, respectively. Dividends received by the Plan are separately payable to participants in accordance with the Plan agreement.
6. |
FEDERAL INCOME TAX STATUS |
The Plan is not qualified under Section 401(a) of the Internal Revenue Code and is exempt from the provisions of Title I of ERISA pursuant to Section 4(b) (4) thereof. The Company believes that the fiduciary should be viewed as a directed custodian and that, for U.S. tax purposes, the participating employees should be treated as the owners of the shares of the Company's common stock held for their account under the Plan.
GAAP requires plan administrators to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS or the Department of Labor. The Plan administrators have analyzed the tax positions taken by the Plan, and have concluded that as of June 30, 2015 and 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan administrators believe it is no longer subject to income tax examinations for years prior to 2012.
The Irish Tax Authority has determined and informed the Company that it is an approved Employee Share Scheme under Irish tax legislation. Therefore, the Plan Administrator believes that the Plan was qualified and tax-exempt as of June 30, 2015 and 2014 and no provision for income taxes has been reflected in the accompanying financial statements.
7. PARTICIPATING PROCTER & GAMBLE COMPANIES
The participating Procter & Gamble Companies are as follows:
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Procter & Gamble (Manufacturing) Ireland Ltd;
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P&G Prestige Products Ltd;
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Procter & Gamble (HABC) Ltd;
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Procter & Gamble (L&CP) Ltd; and
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8. |
RELATED PARTY TRANSACTIONS |
At June 30, 2015 and 2014, the Plan held 52,779 and 56,870 shares, respectively, of common stock of the Company, the sponsoring employer, with a cost basis of €3,211,651 and €3,064,433, respectively. Contributions from participating Procter & Gamble Companies of €557,606, €545,265 and €515,869 were recorded for the years ended June 30, 2015, 2014 and 2013 respectively.
Amounts due from participating Procter & Gamble Companies of €88,976 and €88,572 were recorded at June 30, 2015 and 2014 respectively. During the years ended June 30, 2015, 2014 and 2013, the Plan recorded dividend income from The Procter & Gamble Company common stock of €125,084, €110,749 and €120,997 respectively.
Although they have not expressed any intent to do so, the participating Procter & Gamble Companies have the right under the Plan to discontinue their contributions at any time and to terminate the Plan subject to the provisions set forth in the Plan agreement.
The company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through September 24, 2015, the date the financial were available to be issued. No other events have occurred that require adjustment to or disclosure in the financial statement of the Plan.