Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and of the risks specific to the liability without adjustment for the Company’s credit risk. The unwinding of the discount is recognized as a financial expense.
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1. |
Warranties |
A provision for warranties is recognized when the underlying products are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.
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2. |
Legal claims |
A provision for legal claims is recognized if, as a result of a past event, the Group has a present legal or constructive obligation and it is more likely than not that an outflow of economic benefits will be required to settle that obligation and the amount of obligation can be estimated reliably.
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3. |
Right of return |
A provision for estimated product returns is recognized when there is an obligation to provide a refund upon the return of products (see also Note 3(M)).
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4. |
Machinery and plant dismantling |
A provision for machinery and plant dismantling is recognized when there is a contractual obligation for such activities.