Chrysler 2012 Annual Report Download - page 193

Notes
192 Consolidated
Financial
Statements
at 31 December
2012
27. Other provisions
Changes in Other provisions are as follows:
(€ million)
At 31
December
2011 Charge Utilisation
Release to
income
Translation
differences
Other
changes
At 31
December
2012
Warranty provision 3,530 1,941 (1,621) (182) (51) - 3,617
Restructuring provision 340 54 (76) (56) - (1) 261
Investment provision 24 - - - (1) (10) 13
Other risks 4,704 8,049 (7,438) (323) (63) (30) 4,899
Total Other provisions 8,598 10,044 (9,135) (561) (115) (41) 8,790
The effect of discounting these provisions is €11 million in 2012.
The warranty provision represents the best estimate of commitments given by the Group for contractual, legal, or constructive obligations arising from
product warranties given for a specified period of time beginning at the date of sale to the end customer. This estimate is principally based on assumptions
regarding the lifetime warranty costs of each vehicle and each model year of that vehicle line, as well as historical claims experience for our vehicles. The
provision also includes management’s best estimate of the costs that are expected to be incurred in connection with product defects that could result in a
general recall of vehicles, which is estimated by making an assessment of the historical occurrence of defects on a case-by-case basis.
The restructuring provision at 31 December 2012 consists of termination benefits of €194 million (€208 million at 31 December 2011) payable to employees
in connection with restructuring plans, manufacturing rationalisation costs of €21 million (€26 million at 31 December 2011) and other costs of €46 million
(€106 million at 31 December 2011). These provisions are related to the following activities (in € million): car mass-market operations 178, Components
and Production Systems 40, Other activities 43.
The provision for other risks represents the amounts provided by the individual companies of the Group in connection mainly with contractual and
commercial risks and disputes. Details of this item are as follows:
(€ million) At 31 December 2012 At 31 December 2011
Sales incentives 2,622 2,288
Legal proceedings and other disputes 528 608
Commercial risks 393 400
Environmental risks 36 41
Indemnities 62 66
Other reserves for risk and charges 1,258 1,301
Total Other risks 4,899 4,704
A description of these follows:
Sales incentives - this provision relates to sales incentives that are offered on a contractual basis to the Group’s dealer networks, primarily on the basis
of that dealers will achieve a specific cumulative level of sales transactions during the calendar year. This provision is estimated based on the information
available regarding the sales made by the dealers during the calendar year. The provision also includes sales incentives such as cash rebates announced
by the Group and provided by dealers to customers, for which the dealers are reimbursed. The Group records this provision when it is probable that the
incentive will be provided and the Group’s inventory is sold to its dealers. The Group estimates this provision based on the expected use of these rebates
with respect to the volume of vehicles that has been sold to the dealers.