TomTom 2005 Annual Report Download - page 84
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19.Provisions
Warranty Earnout Other Total
(in
thousands)
Openingbalanceat1January2004 0 0 70 70
Increasesinprovisions 394 0 0 394
Utilised 0 0 -70 -70
Openingbalanceat1January2005 394 0 0 394
Increasesinprovisions 6,733 8,070 7,892 22,695
Utilised -2,047 0 -61 -2,108
Closingbalanceat31December2005 5,080 8,070 7,831 20,981
Warrantyprovision
TheGroupgenerallyofferswarrantiesforitspersonal
navigationproducts.Managementestimatestherelated
provisionforfuturewarrantyclaimsbasedonhistorical
warrantyclaiminformation,aswellasevaluatingany
recenttrendsthatmightsuggestthatpastcost
informationmaydifferfromfutureclaims.
Earnoutprovision
Theprovisionforearn-outsrelatestotheacquisitions
ofDatafactoryandDrivetechin2005(seenote22).
Underthesaleandpurchaseagreements,theformer
shareholdersofDatafactoryaswellasDrivetechare
entitledtoanadditionalpurchasepriceinstalment
dependingontheperformanceoftheacquired
companiesandrelatedtechnologiesduringtheperiod
2006-2008.
Otherprovision
In2005theCompanyformedaprovisionforpotential
legalandtaxrisksinvariousjurisdictions.Thelegal
mattersmainlyconsistofintellectualproperty
infringementissues.Theintellectualproperty
infringementissuesprimarilyrelatetotheKostroncase,
inwhichKostronclaimspriorrightstothetrademark
TomTominvariousjurisdictions.Atthistimethe
Companyisunabletopredictthefinaloutcomewith
regardtotheKostroncase.Duetotheuncertainty
inherentinmattersoflitigation,itisoftendifficultto
predictthefinaloutcome.Thecasesandclaimsagainst
theCompanyoftenraisedifficultandcomplexfactualand
legalissueswhicharesubjecttomanyuncertaintiesand
complexities,includingbutnotlimitedtothefactsand
circumstancesofeachparticularcaseandclaim,thejuris-
dictioninwhicheachsuitisbroughtandthedifferences
inapplicablelaw.Inthenormalcourseofbusiness,
managementconsultswithlegalcounselandcertain
otherexpertsonmattersrelatedtolitigation.
TheCompanyaccruesaliabilitywhenitisdetermined
thatanadverseoutcomeismorelikelythannotandthe
amountofthelosscanbereasonablyestimated.Ifeither
thelikelihoodofanadverseoutcomeisreasonably
possibleoranestimateisnotdeterminable,thematter
isdisclosedprovideditismaterial.
Themethodologyusedtodeterminethelevelofliability
requiressignificantjudgmentsandestimatesregarding
thecostsofsettlingassertedclaims.Duetothefactthat
thereislimitedhistoricaldataavailabletheestimated
liabilitycannotbebaseduponrecentsettlement
experienceforsimilartypesofclaims.