Philips 2010 Annual Report Download - page 178

19 13 Group financial statements 13.11 - 13.11
178 Annual Report 2010
19 Provisions
2009 2010
long-
term short-
term long-
term short- term
Provisions for defined-benefit
plans (see note 28) 669 61 719 52
Other postretirement benefits
(see note 28) 296 21 297 21
Postemployment benefits and
obligatory severance payments 106 29 95 21
Product warranty 108 227 94 254
Loss contingencies
(environmental remediation and
product liability) 186 14 222 28
Restructuring-related provisions 78 318 49 177
Other provisions 291 46 240 70
1,734 716 1,716 623
Postemployment benefits and obligatory severance payments
The provision for postemployment benefits covers benefits provided to
former or inactive employees after employment but before retirement,
including salary continuation, supplemental unemployment benefits and
disability-related benefits.
The provision for obligatory severance payments covers the Group’s
commitment to pay employees a lump sum upon the employee’s
dismissal or resignation. In the event that a former employee has passed
away, the Group may have a commitment to pay a lump sum to the
deceased employee’s relatives.
Product warranty
The provision for product warranty reflects the estimated costs of
replacement and free-of-charge services that will be incurred by the
Group with respect to products sold. The Group expects the provision
will be utilized mostly within the next year. The changes in the provision
for product warranty are as follows:
2008 2009 2010
Balance as of January 1 323 310 335
Changes:
Additions 333 333 309
Utilizations (357) (324) (312)
Translation differences (3) 3 16
Changes in consolidation 14 13 −
Balance as of December 31 310 335 348
Loss contingencies (environmental remediation and product
liability)
This provision primarily includes accrued losses recorded with respect
to environmental remediation and asbestos product liability. The
asbestos liability was settled in 2009. At December 31, 2010, the
provision relates to environmental remediation. Approximately half of
this provision is expected to be utilized within the next 5 years. The
remaining portion relates to longer-term remediation activities.
The changes in this provision are as follows:
2008 2009 2010
Balance as of January 1 451 812 200
Changes:
Additions 318 25 50
Utilizations (15) (583) (8)
Releases 37 − (2)
Translation differences 21 (54) 10
Balance as of December 31 812 200 250
Restructuring-related provisions
The most significant projects in 2010
The restructuring charges in 2010 were mainly attributable to the
operating sectors.
•Within Healthcare, the largest projects were reorganizations of the
commercial organizations in Imaging Systems (Germany,
Netherlands, and the US).
• Consumer Lifestyle restructuring charges were mainly in Television,
particularly in China due to the brand licensing agreement with TPV.
• Restructuring projects in Lighting were focused on reduction of
production capacity in traditional lighting technologies, such as
incandescent. The largest projects were in Brazil, France, and the US.
The movements in the provisions and liabilities for restructuring in 2010
are presented by sector as follows:
Dec. 31,
2009 addi- tions utilized released other
changes1)
Dec. 31,
2010
Healthcare 24 63 (39) (17) 2 33
Consumer
Lifestyle 142 32 (78) (14) (7) 75
Lighting 164 65 (128) (26) (5) 70
GM&S 66 11 (30) (20) 21 48
396 171 (275) (77) 11 226
1) Other changes primarily relate to translation differences and transfers between
sectors
The most significant projects in 2009
•Healthcare initiated various restructuring projects aimed at
reduction of the fixed cost structure, mainly impacting Imaging
Systems (Netherlands), Home Healthcare Solutions and Clinical
Care Systems (various locations in the US).
• Consumer Lifestyle restructuring projects focused on Television
(primarily Belgium and France), Peripherals & Accessories (mainly
Technology & Development in the Netherlands) and Domestic
Appliances (mainly Singapore and China).
• Restructuring projects at Lighting aimed at further increasing
organizational effectiveness, and centered on Lamps. The largest
restructuring projects were in the Netherlands, Belgium, Poland and
various locations in the US.
• In Group Management & Services restructuring projects focused on
reducing the fixed cost structure of Corporate Research
Technologies, Philips Information Technology, Philips Design, and
Corporate Overheads.
In 2009, restructuring provisions of EUR 81 million were released,
mainly as a result of transferring employees within the Group and the
release of a restructuring provision in conjunction with the sale of
Hoffmeister (Lighting).
While all these projects have been communicated, many of these
projects have been completed in 2010 and will be completed early 2011,
and will affect approximately 5,000 employees.