2.6 Movements in provisions, accrued liabilities and deferred income and contingent liabilities

2.6.1 Movements in provisions

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CHF million

 

Personnel and social security

 

Warranties

 

Legal

 

Onerous contracts

 

Restructuring

 

Other

 

Provisions

 

Deferred tax liabilities

 

Provisions and deferred tax liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2019

 

56

 

37

 

14

 

8

 

15

 

25

 

155

 

58

 

213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase

 

7

 

22

 

2

 

4

 

15

 

8

 

58

 

5

 

63

Use

 

–4

 

–12

 

–4

 

–4

 

 

 

–1

 

–25

 

 

 

–25

Release

 

–2

 

–5

 

–2

 

–8

 

 

 

–3

 

–20

 

–8

 

–28

Changes in scope of consolidation

 

–5

 

 

 

 

 

 

 

 

 

 

 

–5

 

–2

 

–7

Translation adjustment

 

–2

 

–1

 

 

 

 

 

 

 

1

 

–2

 

 

 

–2

As of 31 December 2018

 

62

 

33

 

18

 

16

 

 

 

20

 

149

 

63

 

212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase

 

11

 

23

 

8

 

7

 

 

 

11

 

60

 

17

 

77

Use

 

–5

 

–15

 

–2

 

–4

 

 

 

–1

 

–27

 

 

 

–27

Release

 

–1

 

–8

 

–8

 

–5

 

 

 

–9

 

–31

 

–3

 

–34

Changes in scope of consolidation

 

–16

 

 

 

 

 

6

 

 

 

–4

 

–14

 

2

 

–12

Translation adjustment

 

–2

 

–2

 

 

 

 

 

 

 

 

 

–4

 

 

 

–4

As of 31 December 2017

 

75

 

35

 

20

 

12

 

 

 

23

 

165

 

47

 

212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

4

 

24

 

1

 

5

 

7

 

11

 

52

 

 

 

52

– non-current

 

52

 

13

 

13

 

3

 

8

 

14

 

103

 

58

 

161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity structure of the provisions 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– current

 

4

 

21

 

2

 

6

 

 

 

5

 

38

 

 

 

38

– non-current

 

58

 

12

 

16

 

10

 

 

 

15

 

111

 

63

 

174

The valuation of provisions in all categories is based on actual data if available (e.g. claims that have occurred or been reported) or on the experience of recent years and management estimates. The deferred tax liabilities are based on temporary valuation differences, which are reported in the balance sheet at the level of GF Corporate Companies.

Management assumptions and estimates

In the course of their ordinary operating activities, GF Corporate Companies can become involved in litigation. Provisions for pending legal proceedings are measured on the basis of the information available and a realistic estimate of the expected outflow of resources. The outcome of these proceedings may result in claims against the Corporation that cannot be met or cannot be met in full through provisions or insurance cover. If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous delivery contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period. These provisions are based on management assumptions.

Personnel and social security

Includes provisions for employee retirement benefits and other service-related employee benefits which are not provided by pension funds or similar institutions as well as anniversary bonuses and provisions for work accidents. For employee benefits provided by pension funds refer to note 5.1.

Warranties

Cover expected expenses for warranty benefits such as repairs and replacements. All three divisions provide warranty benefits to their customers: 40% of the provisions relate to GF Machining Solutions (previous year: 39%), 40% to GF Casting Solutions (previous year: 24%) and 20% to GF Piping Systems (previous year: 37%).

Legal

Includes all obligations deriving from legal cases and litigations. None of the individual provision should lead to an outflow of more than CHF 10 million (previous year: CHF 6 million).

Onerous contracts

Summarizes contracts for which the fulfillment leads to unavoidable costs that exceed the associated economic benefits. Onerous contracts concern mainly GF Casting Solutions.

Restructurings

Summarizes provisions for legal and or constructive obligations deriving from restructurings. A constructive obligation arises when a detailed and formal plan for a restructuring exists and a valid expectation in those affected by the restructuring was raised. The increase in provision is related to restructuring and relocation activities in Europe.

Other

Includes all other events that give raise to a provision such as non-warranty claims by customers and risks from business activities not allocated to warranties, legal or onerous contract category.

Management assumptions and estimates

In the course of their ordinary operating activities, GF Corporate Companies can become involved in litigation. Provisions for pending legal proceedings are measured on the basis of the information available and a realistic estimate of the expected outflow of resources. The outcome of these proceedings may result in claims against the Corporation that cannot be met or cannot be met in full through provisions or insurance cover. If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous delivery contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period. These provisions are based on management assumptions.

2.6.2 Accrued liabilities and deferred income

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CHF million

 

2019

 

2018

 

 

 

 

 

Overtime, holiday, bonuses, and sales-related premiums

 

94

 

113

Accrued liabilities/deferred income for commissions and discounts

 

34

 

33

Accrued liabilities/deferred income for annual audit fees

 

4

 

4

Other accrued liabilities and deferred income

 

102

 

103

Total

 

234

 

253

2.6.3 Contingent liabilities

Contingent liabilities amount to CHF 81 million (previous year: CHF 125 million) and include guarantees to related parties in favor of third parties and guarantees to third parties. The decrease is explained by the reduction in guarantees in favor of related parties in relation to the divestments in 2018. The divestment to third parties in 2019 added CHF 5 million to the overall amount.

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