20. Provisions
(a) Provisions as of December 31, 2016 and 2017 are as follows:
| 2016 | 2017 | |||||||||||||||
| Current | Non-current | Current | Non-current | |||||||||||||
| (in millions of Won) | ||||||||||||||||
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Provision for bonus payments |
￦ | 42,986 | — | 49,171 | — | |||||||||||
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Provision for construction warranties |
10,551 | 86,158 | 11,804 | 106,232 | ||||||||||||
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Provision for legal contingencies and claims (*1) |
4,348 | 80,498 | 495 | 36,269 | ||||||||||||
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Provision for the restoration (*2) |
10,169 | 52,425 | 12,273 | 121,917 | ||||||||||||
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Others (*3,4) |
46,811 | 118,658 | 37,203 | 212,754 | ||||||||||||
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| ￦ | 114,865 | 337,739 | 110,946 | 477,172 | ||||||||||||
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| (*1) | The Company recognized probable outflow of resources amounting to ￦30,425 million and ￦27,963 million as provisions in relation to lawsuits against the Company as of December 31, 2016 and 2017, respectively. |
| (*2) | Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery, ￦29,471 million as provisions for restoration as of December 31, 2017. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 2.73% to measure present value of these costs. |
| (*3) | As of December 31, 2016 and 2017, POSCO ENERGY CO., LTD., a subsidiary of the Company, recognized ￦87,827 million and ￦157,461 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources. |
| (*4) | As of December 31, 2016 and 2017, the amount includes a provision of ￦23,600 million for expected outflow of resources in connection with the performance guarantee for the Hwaseong-Dongtan complexes development project of POSCO ENGINEERING & CONSTRUCTION CO., LTD. |
(b) The following are the key assumptions concerning the future and other key sources of estimation uncertainties at the end of the reporting period.
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Key assumptions for the estimation |
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Provision for bonus payments |
Estimations based on financial performance | |
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Provision for construction warranties |
Estimations based on historical warranty data | |
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Provision for legal contingencies and claims |
Estimations based on the degree of probability of an unfavorable outcome and the ability to make a sufficient reliable estimate of the amount of loss |
(c) Changes in provisions for the years ended December 31, 2016 and 2017 were as follows:
1) For the year ended December 31, 2016
| Beginning | Increase | Utilization | Reversal | Others (*1) | Ending | |||||||||||||||||||
| (in millions of Won) | ||||||||||||||||||||||||
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Provision for bonus payments |
￦ | 42,602 | 44,106 | (42,211 | ) | (272 | ) | (1,239 | ) | 42,986 | ||||||||||||||
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Provision for construction warranties |
81,446 | 33,925 | (19,469 | ) | (2,695 | ) | 3,502 | 96,709 | ||||||||||||||||
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Provision for legal contingencies and claims |
52,610 | 45,525 | (14,012 | ) | (188 | ) | 911 | 84,846 | ||||||||||||||||
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Provisions for the restoration |
45,111 | 42,529 | (13,367 | ) | (12,475 | ) | 796 | 62,594 | ||||||||||||||||
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Others |
102,243 | 131,911 | (68,143 | ) | (3,086 | ) | 2,544 | 165,469 | ||||||||||||||||
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| ￦ | 324,012 | 297,996 | (157,202 | ) | (18,716 | ) | 6,514 | 452,604 | ||||||||||||||||
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| (*1) | Includes adjustments of foreign currency translation differences and others. |
2) For the year ended December 31, 2017
| Beginning | Increase | Utilization | Reversal | Others (*1) | Ending | |||||||||||||||||||
| (in millions of Won) | ||||||||||||||||||||||||
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Provision for bonus payments |
￦ | 42,986 | 74,728 | (64,319 | ) | (3,035 | ) | (1,189 | ) | 49,171 | ||||||||||||||
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Provision for construction warranties |
96,709 | 40,916 | (18,006 | ) | (2,502 | ) | 919 | 118,036 | ||||||||||||||||
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Provision for legal contingencies and claims |
84,846 | 27,459 | (70,156 | ) | (1,749 | ) | (3,636 | ) | 36,764 | |||||||||||||||
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Provisions for the restoration |
62,594 | 63,438 | (8,530 | ) | — | 16,688 | 134,190 | |||||||||||||||||
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Others |
165,469 | 161,054 | (64,850 | ) | (20,199 | ) | 8,483 | 249,957 | ||||||||||||||||
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| ￦ | 452,604 | 367,595 | (225,861 | ) | (27,485 | ) | 21,265 | 588,118 | ||||||||||||||||
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| (*1) | Includes adjustments of foreign currency translation differences and others. |