3.10 Provisions
Provisions for Risks and Expenses
The provisions for risks and lawsuits correspond to the commitments resulting from lawsuits and various risks whose due dates and amounts are uncertain.
A provision is posted to the accounts when the Company has a legal or implicit obligation to a third party resulting from a past event, concerning which it is likely or certain that it will cause an outflow of resources to that third party, without consideration that is anticipated to be at least equivalent to the latter, and that the future outflows of liquid assets can be estimated reliably.
The amount recorded in the accounts as a provision is the best estimation of the expenses necessary to extinguish the obligation.
Pension Retirement Obligations
The employees of the Company receive the retirement benefits stipulated by law in France:
| • | obtaining a compensation paid by the Company to employees upon their retirement (defined-benefit plan); |
| • | payment of retirement pensions by the Social Security agencies, which are financed by the contributions made by companies and employees (defined-contribution plans). |
For the defined-benefit plans, the costs of the retirement benefits are estimated by using the projected credit unit method. According to this method, the cost of the retirement pensions is recognized in the Consolidated Statements of (Loss) so that it is distributed uniformly over the term of the services of the employees. The retirement benefit commitments are valued at the current value of the future payments estimated using, for the discounting, the market rate based on the long-term obligations of the first-category companies with a term that corresponds to that estimated for the payment of the services provided.
The Company relies on external actuaries to conduct an annual review of the valuation of these plans.
The difference between the amount of the provision at the beginning of a fiscal year and at the close of that year is recognized through profit or loss for the portion representing the costs of services rendered and through other comprehensive income for the portion representing the actual gains and losses.
The Company’s payments for the defined-contribution plans are recognized as operating expenses on the Consolidated Statements of (Loss) of the period with which they are associated.