Siemens 2005 Annual Report Download - page 190

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22 Other accruals and provisions
The Company is subject to asset retirement obligations related to certain tangible long-lived
assets. Such asset retirement obligations are primarily attributable to environmental clean-up
costs which amounted to €499, and €513, respectively, as of September 30, 2005 and 2004 (thereof
non-current portion of €461, and €445, respectively) and to costs primarily associated with the
removal of leasehold improvements at the end of the lease term amounting to €43, and €39,
respectively as of September 30, 2005 and 2004 (thereof non-current portion of €38 and €33,
respectively).
Environmental clean-up costs are mainly related to remediation and environmental protec-
tion liabilities which have been accrued for the estimated costs of decommissioning facilities for
the production of uranium and mixed-oxide fuel elements in Hanau, Germany (Hanau facilities),
as well as in Karlstein, Germany (Karlstein facilities). According to the German Atomic Energy
Act, when such a facility is closed, the resulting radioactive waste must be collected and delivered
to a government-developed final storage facility. In this regard, the Company has developed a
plan to decommission the Hanau and Karlstein facilities in the following steps: clean-out, decon-
tamination and disassembly of equipment and installations, decontamination of the facilities
and buildings, sorting of radioactive materials, and intermediate and final storage of the radio-
active waste. This process will be supported by continuing engineering studies and radioactive
sampling under the supervision of German federal and state authorities. The decontamination,
disassembly and sorting activities are planned to continue in Hanau until 2007 and in Karlstein
until 2010; thereafter, the Company is responsible for intermediate storage of the radioactive
materials until a final storage facility is available. The final location is not expected to be available
before approximately 2030. The ultimate costs of the remediation are contingent on the decision
of the federal government on the location of the final storage facility and the date of its avail-
ability. Consequently, the accrual is based on a number of significant estimates and assumptions.
The Company does not expect any recoveries from third parties and did not reduce the accruals
for such recoveries. The Company believes that it has adequately provided for this exposure.
The current credit adjusted risk free interest rates for the environmental liabilities relating to
the decommissioning of the Hanau and Karlstein facilities, range from approximately 3% to 6%.
The rates are determined based on the differing durations of the steps of decommissioning. As
of September 30, 2005 and 2004, the accrual totals €499 and €513, respectively, and is recorded
net of a present value discount of €1,472, and €1,471, respectively. The total expected payments
for each of the next five fiscal years and the total thereafter are €40, €19, €17, €18, €12, and €1,865
(includes €1,789 for the estimated costs associated with final storage in 2033).
The Company recognizes the accretion of the liability for the Hanau facility using the effective
interest method. In each of the years ended September 30, 2005 and 2004, the Company recog-
nized €26 in accretion expense in Other operating income (expense), net.
Management’s discussion and analysis
September 30,
2005 2004
Product warranties 796 728
Asset retirement obligations 499 478
Deferred income 324 356
Other long-term accruals 3,200 2,454
4,819 4,016