Lenovo 2012 Annual Report Download - page 28

MANAGEMENT’S DISCUSSION & ANALYSIS
2011/12 Annual Report Lenovo Group Limited
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Inventories
Inventories of the Group maintained at a stable level over the year. The significant increase at March 31, 2012 when
compared to last year represents the inventories brought in by the NEC JV and Medion of US$352 million.
Trade receivables and Notes receivable
Trade receivables and notes receivable increased in line with the increase in activities during the year. The new customers
brought in from the formation of the NEC JV and the acquisition of Medion increased the trade receivables of the Group
by US$723 million.
Deposits, prepayments and other receivables
Majority of other receivables of the Group are amounts due from subcontractors for part components sold in the ordinary
course of business. The 43% increase when compared to the last year is partly due to the new receivable balances from
subcontractors of US$204 million brought in by the NEC JV.
Non-current liabilities 2012 2011
Warranty provision 291,111 395,242
Deferred revenue 381,593 277,205
Retirement benefit obligations 204,818 74,870
Deferred income tax liabilities 83,594 17,093
Other non-current liabilities 641,986 73,976
1,603,102 838,386
Warranty provision
The Group records warranty liabilities at the time of sale for the estimated costs that will be incurred under its basic
limited warranty. The specific warranty terms and conditions vary depending upon the product and the country in which it
was sold, but generally includes technical support, repair parts and labor associated with warranty repair and service
actions. The period ranges from one to three years. The aggregate current and non-current amounts of warranty
provision increased by 46% when compared with last year. The increase is partly attributable to the increase business
activities of the year, and the amounts brought in from the formation of the NEC JV and the acquisition of Medion totaling
US$158 million. The Group reevaluates its estimates on a quarterly basis to assess the adequacy of its recorded warranty
liabilities and adjusts the amounts as necessary.
Retirement benefit obligations
The Group operates various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans. During the year, upon formation of the NEC JV, the Group assumed the cash
balance pension liability and end-of-employment benefit obligation for all employees from the then NEC personal
computer division and pension commitment for the two Medion’s management board members, totaling US$116 million.
Other non-current liabilities
Other non-current liabilities mainly represent the present value of the contingent consideration payable of US$429 million
in connection with the arrangements with the respective former shareholders of NEC JV and Medion with reference to
certain performance indicators.