TomTom 2007 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2007 TomTom annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 88

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88

69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OF TOMTOM NV
23. PROVISIONS
Claims,
Litigation
(€in thousands) Warranty Earn out & Other Total
Opening balance at 1 January 2006 5,080 8,070 7,831 20,981
Increases in provisions 32,940 0 10,713 43,653
Utilised -16,525 -2,747 -171 -19,443
Released 0 0 -1,406 -1,406
Opening balance at 1 January 2007 21,495 5,323 16,967 43,785
Increases in provisions 39,020 0 36,570 75,590
Utilised -21,137 -775 -74 -21,986
Released 0 0 -1,420 -1,420
Closing balance at 31 December 2007 39,378 4,548 52,043 95,969
Warranty provision
The Group generally offers warranties for its personal navigation products. Management estimates the related
provision for future warranty claims based on historical warranty claim information, as well as evaluating recent
trends that might suggest that past cost information may differ from future claims.
Earn out provision
The provision for earn-outs relates to previous acquisitions. Under the sale and purchase agreements, the former
shareholdersof the acquired Companies areentitled to an additional purchase price installment, depending on
the performanceof the acquired companies and related technologies during the period 2007 – 2008. Based upon
management’s best estimate, the Group provided for the maximum expected earn out.
Other provision
The Group formed a provision for potential legal and tax risks in various jurisdictions. The legal matters mainly
consist of intellectual property infringement issues. In the normal course of business, the Group receives claims
relating toallegations that TomTom has infringed intellectual property assets and the companies making the
claims seek payments which may take the form of licences and/or damages. Some of these claims may be
resisted, some arelikely to be settled by negotiation and others are expected to result in litigation.
The cases and claims against the Group often raise difficult and complex factual and legal issues which are
subject to many uncertainties and complexities, including but not limited to the facts and circumstances of each
particular case and claim, the jurisdiction in which each suit is brought, and the differences in applicable law. In
the normal course of business, management consults with legal counsel and certain other experts on matters
related to litigation. The Group accrues a liability when it is determined that an adverse outcome is more likely
than not, and the amount of the loss can be reasonably estimated. If either the likelihood of an adverse outcome
is reasonably possible or an estimate is not determinable, the matter is disclosed, provided it is material. The
directorsareof the opinion that the provision is adequateto resolve these claims.
The methodology used to determine the level of liability requires significant judgments and estimates regarding
the costs of settling asserted claims. Due tothe fact that there is limited historical data available, the estimated
liability cannot be based upon recent settlement experience for similar types of claims.
Analysis of total provisions
(€in thousands) 2007 2006
Non-current 41,624 9,682
Current 54,345 34,103
95,969 43,785