Philips 2013 Annual Report Download - page 166

21 11 Group financial statements 11.9 - 11.9
166 Annual Report 2013
21 Provisions
2012 2013
long-
term
short-
term
long-
term
short-
term
Provisions for defined-benefit
plans (see note 30) 808 52 754 51
Other postretirement
benefits (see note 30) 233 17 200 14
Postemployment benefits and
obligatory severance
payments 56 26 41 25
Product warranty 90 229 59 207
Environmental provisions 330 45 249 62
Restructuring-related
provisions 108 277 75 128
Onerous contract provisions 67 61 40 53
Other provisions 427 130 485 111
2,119 837 1,903 651
Post-employment benefits and obligatory severance payments
The provision for post-employment benefits covers benefits provided to
former or inactive employees after employment but before retirement,
including salary continuation, supplemental unemployment benefits and
disability-related benefits.
2011 2012 2013
Balance as of January 1 116 104 82
Changes:
Additions 29 12 15
Utilizations (41) (37) (29)
Translation dierences − 1 (1)
Changes in consolidation − 2 (1)
Balance as of December 31 104 82 66
The provision for obligatory severance payments covers the Company
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 Company may have a commitment to pay a lump sum to the
deceased employee’s relatives. The Company expects the provision will
be utilized mostly within the next three years.
Product warranty
The provision for product warranty reflects the estimated costs of
replacement and free-of-charge services that will be incurred by the
Company with respect to products sold. The Company expects the
provision will be utilized mainly within the next year. The changes in the
provision for product warranty are as follows:
2011 2012 2013
Balance as of January 1 404 378 319
Changes:
Additions 444 370 350
Utilizations (470) (427) (363)
Transfer to assets classified as held for
sale − − (24)
Translation dierences 1 (4) (16)
Changes in consolidation (1) 2 −
Balance as of December 31 378 319 266
Environmental provisions
The environmental provisions include accrued losses recorded with
respect to environmental remediation. Approximately half of this
provision is expected to be utilized within the next five years. The
remaining portion relates to longer-term remediation activities.
The changes in this provision are as follows:
2011 2012 2013
Balance as of January 1 250 305 375
Changes:
Additions 48 48 30
Utilizations (15) (22) (21)
Releases (15) (1) (16)
Changes in discount rate 25 18 (40)
Accretion 6 6 6
Translation dierences 6 (4) (8)
Purchase price allocation adjustment − − (15)
Changes in consolidation − 25 −
Balance as of December 31 305 375 311
The decrease of provision due to changes in discount rate in 2013 relates
to an overall increase of the market rates used in discounting.
For more details on the main assumptions underlying environmental
provisions reference is made to note 26, Contingent assets and liabilities.
Restructuring-related provisions
The most significant projects in 2013
In 2013, the most significant restructuring projects related to Lighting and
were driven by the industrial footprint rationalization.
• In Healthcare, the largest projects were undertaken in Customer
Services, Home Healthcare Solutions and Imaging Systems in the
United States, Italy and the Netherlands to reduce the operating costs
and simplify the organization.
• Consumer Lifestyle restructuring charges were mainly related to
Personal Care (primarily in the Netherlands and Austria) and Coee
(mainly Italy).
• Restructuring projects at Lighting centered on Luminaires businesses
and Light Sources & Electronics, the largest of which took place in the
United States, France and Belgium.
• Innovation, Group & Services restructuring projects mainly focused on
the Financial Operations Service Unit, primarily in Italy, France and the
United States.
The Company expects the provision will be utilized mainly within the next
year. The movements in the provisions and liabilities for restructuring in
2013 are presented by sector as follows:
Dec. 31,
2012
addi-
tions utilized
re-
leased
other
changes1)
Dec. 31,
2013
Healthcare 77 14 (50) (23) (1) 17
Consumer
Lifestyle 48 11 (27) (10) (1) 21
Lighting 198 64 (110) (19) (3) 130
IG&S 62 16 (30) (15) 2 35
385 105 (217) (67) (3) 203
1) Other changes primarily relate to translation dierences and transfers
between sectors
The most significant projects in 2012
In 2012, the most significant restructuring projects related to Lighting and
Healthcare and were driven by our change program Accelerate!.