Note 26 • Provisions, commitments and contingent liabilities
(a) Provisions
|
€’000 |
Tax litigations |
Restructuring |
Claims and other |
Total |
|
Balance at 1 January 2010 |
5,555 |
1,277 |
2,669 |
9,501 |
|
Provisions made during the year |
11,114 |
– |
828 |
11,942 |
|
Provisions used during the year |
(594) |
(1,035) |
(579) |
(2,208) |
|
Provisions reversed during the year |
(1,514) |
(157) |
(267) |
(1,938) |
|
Balance at 31 December 2010 |
14,561 |
85 |
2,651 |
17,297 |
Tax litigation provisions relate to several jurisdictions where the Group has received tax assessments and is in the process of defending its tax positions. The provisions are based on management’s experience in each jurisdiction, external advice related to the case, the state of development of the country’s tax system, and consider likely outcomes to determine the level of accruals. The outcome of these litigations is expected to be decided within up to one year.
Restructuring provision of €0.1 million relates to the restructuring of global supply.
(b) Contingent liabilities
Certain of the Company’s subsidiaries are involved in litigation in respect of which the Board of Directors consider that either the timing and outcome of the litigation is too uncertain to quantify at this stage and/or the possibility of an adverse outcome is remote and/or in the event that there was such an adverse outcome, the financial consequence is not likely to be material. The Group continues to actively monitor and defend such litigation.
One of the Oriflame sales companies received a tax claim for an equivalent of €15.8 million. The management of the Group contest the claim at court and is confident in a favourable outcome regarding part of the claim. The remaining €2.4 million were recognised as a tax litigation provision.
Another Oriflame sales subsidiary is contesting in court a custom duty claim of €1.3 million out of which the Group provided €0.3 million in claims and other provision based on management’s assessment for positive outcome.
(c) The Group had minimum annual lease commitments under non-cancellable operating leases at 31 December as follows:
|
€’000 |
2010 |
2009 |
|
Within one year |
22,152 |
18,361 |
|
Between one and three years |
32,459 |
26,346 |
|
Between three and five years |
16,957 |
16,513 |
|
Over five years |
4,159 |
21,044 |
|
75,727 |
82,264 |
The Group’s lease agreements consist mainly of office and warehouse rentals, none of which are individually significant. There are no subleases.
During the year ending 31 December 2010 €34.7 million (€29.6 million) was recognised as an expense in the consolidated income statements in respect of operating leases.
(d) Bank guarantees
At 31 December 2010, the Group had bank guarantees in place of €9.9 million (€11 million).