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90
Note 16 - Provisions for Contingencies
(in millions of euros)
Dec. 31, Allowances Releases Releases Changes Reclassifi- Translation Dec. 31,
2003 Unused Used in scope of cations adjustment 2004
consolidation
Economic risks (a) 33.9 8.9 - (3.3) 11.0 9.5 (1.1) 58.9
Customer risks (b) 59.0 3.8 - (11.3) 1.4 2.5 (3.8) 51.6
Technical risks (c) 12.5 31.2 (0.4) (9.2) - 0.4 (2.0) 32.5
Environmental risks (d) - 0.3 (0.3) - 36.3 (0.5) 35.8
Other risks (e) 51.3 0.1 (2.3) (9.2) - (10.0) - 29.9
Total 156.7 44.3 (2.7) (33.3) 12.4 38.7 (7.4) 208.7
Impact on
Operating income - 37.9 (0.4) (24.9) - - - -
Financial income
(expense), net - - - - - - - -
Exceptional items - 6.4 (2.3) (8.4) - - - -
The Group records these provisions for identified
potential losses. They are calculated either on a case-
by-case basis or by a statistical or insurance coverage
method.
(a) Economic risks
Specific provisions have been accrued by the Group
to cover identified tax risks raised in the course of tax
audits performed by various local tax administrations.
Additionally, these provisions include a specific
amount for the potential loss on a receivable from a
third party in connection with a tax audit. This receiv-
able represents lending by the Group to the third party
in charge of liquidating certain assets to resolve the
freeze of its cash under certain legal proceedings.
(b) Customer risks
These provisions are primarily set aside in connection
with risks related to products sold to customers and
other third parties. Product liability represents claims
that individuals file due to alleged product defects.
(c) Technical risks
Provisions are constituted on a statistical basis for
product warranties beyond coverage provided by
insurance. Such warranties may run up to 18 months
and are classified as accrued expenses. The Group
also recognizes provisions to cover disputes concern-
ing defective products and recalls of clearly identified
products. The short-term portion (less than one year)
is classified under accrued expenses.
In 2004, Square D became aware that one of its AFI
Breaker circuit breakers malfunctioned due to a defect
in an electronic circuit manufactured by a subcontrac-
tor. A provision of $ 27 million (around 21 million)
was set aside in 2004. The remaining provision at
December 31, 2004 totaled $ 25 million (around 19
million).
In April 2001, the Group became aware that certain
Harmony emergency pushbuttons, installed on a wide
range of machines, failed to function in certain circum-
stances. The Group initiated a comprehensive product
recall program. The entire 18.3 million provision set
aside for this program was used when the recall
expired on December 31, 2004.
(in millions of euros)
Dec. 31, 2004 Dec. 31, 2003
3. Funded status
Funded status (406.8) (424.4)
Unrecognized actuarial (gains)/losses 185.4 210.9
Unrecognized prior service cost (46.0) (51.5)
Unrecognized initial liability - -
Net (liability)/asset recognized (267.4) (265.0)