A provision is recognised in the statement of financial position if the Group has a present legal or constructive obligation that is the result of a past event and it is probable that its settlement will require an outflow of funds. The provisions are recognised at nominal value, unless the time value of money is material. In such cases, the expected cash flows are discounted on the basis of a pre-tax discount rate that reflects current market estimates of the time value of money and, where necessary, the specific risks related to the liability. The accrued interest on provisions is recognised as a financing expense.
(21a) Warranties
A provision for warranties is recognised after the underlying products or services have been sold and delivered. The provision is made for costs that must be incurred to correct deficiencies that appear after delivery but during the warranty period.
(21b) Restructuring
A restructuring provision is recognised when (i) the Group has approved a detailed and formal restructuring plan and (ii) the restructuring has either commenced or been publicly announced.
(21c) Environment
A provision for restoration of contaminated land is recognised in accordance with the Group’s environmental policy and applicable legal requirements.
(21d) Onerous contracts
A provision for onerous contracts is recognised if the economic benefits (i.e. the probable revenues) that the Group expects to receive from a contract are lower than the costs of meeting the contractual obligations, unless the net costs of terminating the contract are lower. For contracts related to the execution of works, these costs are the costs attributable to the outstanding performance obligations. Where appropriate, the Group recognises any impairment losses on any assets associated with the contract prior to forming the provision.