TomTom 2014 Annual Report Download - page 77

SECTION 6 OTHER DISCLOSURES
This section includes the notes on provisions, commitments and contingent liabilities, remunerations of Members of the Management Board
and the Supervisory Board, related party transactions and Auditor's remuneration.
31. Provisions
(€ in thousands) 2014 2013
Non-current 48,496 55,857
Current 34,074 23,975
TOTAL 82,570 79,832
The movements in each category of provisions are as follows:
(€ in thousands) Warranty Claims &
litigations Other Total
BALANCE AS AT 31 DECEMBER 2012 35,791 36,439 9,230 81,460
Increases in provisions 19,022 11,105 5,320 35,447
Utilised –18,805 –5,362 –895 –25,062
Released –3,435 –8,578 0 –12,013
BALANCE AS AT 31 DECEMBER 2013 32,573 33,604 13,655 79,832
Increases in provisions 20,188 13,086 6,913 40,187
Utilised –20,266 –1,721 –2,418 –24,405
Released 206 –12,9981–252 –13,044
BALANCE AS AT 31 DECEMBER 2014 32,701 31,971 17,898 82,570
1In 2014, we recorded a gain of €8.2m as a result of changes in estimates in our claims and litigation provision.
Accounting policy
Provisions are recognised when:
• The group has a present obligation as a result of a past event;
• It is probable that the group will be required to settle that obligation; and
• The amount can be reliably estimated.
Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.
Provisions for warranty costs are recognised at the date of sale of the relevant products, at management's best estimate of the expenditure
required to settle the group's obligation. Warranty costs are recorded within cost of sales.
Significant estimates
Warranty provision
The group generally offers warranties for its 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.
From the total warranty provision of €32.7 million, it is estimated that an amount of €20.1 million will be utilised within 12 months.
Claims and litigation
The group made a provision for potential legal, tax and other risks in various jurisdictions. The legal matters consist mainly of intellectual
property infringement issues. In the normal course of business, the group receives claims relating to allegations that it has infringed intellectual
property assets. In such cases, the companies making the claims seek payments that may take the form of licenses and/or damages. While
these claims will 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 such claims and 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 the likelihood of an adverse outcome is reasonably possible or an
estimate is not determinable, the matter is disclosed, provided it is material. Management is 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.
Based on the best estimate, the portion of the claims and litigation provision expected to be settled in the coming twelve months amounts
to approximately €9.7 million.
CONTENTS OVERVIEW MANAGEMENT
BOARD REPORT CORPORATE GOVERNANCE SUPERVISORY BOARD REPORT FINANCIAL
STATEMENTS SUPPLEMENTARY
INFORMATION
ANNUAL REPORT AND ACCOUNTS 2014 / 77