TomTom 2008 Annual Report Download - page 73

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/ 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OF TOMTOM NV
25. PROVISIONS
Claims,
litigation
Warranty & other Total
Opening balance at 1 January 2007 21,495 22,290 43,785
Increases in provisions 39,020 36,570 75,590
Utilised -21,137 -849 -21,986
Released 0 -1,420 -1,420
Opening balance at 1 January 2008 39,378 56,591 95,969
Increases in provisions 49,931 46,627 96,558
Utilised -41,281 -9,076 -50,357
Released 0 -29,237 -29,237
Closing balance at 31 December 2008 48,028 64,905 112,933
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.
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 to allegations that we have 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 are likely 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
directors are of the opinion that the provision is adequate to resolve these claims.
The methodology used to determine the amount of the liability requires significant judgements and estimates
regarding the costs of settling asserted claims. Due to the fact that there is limited historical data available, the
estimated liability cannot be based upon recent settlement experience for similar types of claims.
The other provision also includes earn-outs related to previous acquisitions. Under the sale and purchase
agreements, the former shareholders of the acquired companies are entitled to an additional purchase price
instalment, depending on the performance of the acquired companies and related technologies during the year
2008. Based upon management’s best estimate, the Group provided for the maximum expected earn out.
Analysis of total provisions
(€ in thousands) 2008 2007
Non-current 55,702 41,624
Current 57,231 54,345
112,933 95,969
26. TRADE PAYABLES
Trade payables
(€ in thousands) 2008 2007
Less than 1 year outstanding 152,119 151,859
Total trade payables 152,119 151,859