Group 33: Provisions

Provisions for warranties were created on the basis of estimated costs of warranties calculated by taking into account the past known data on the quality level of products and the costs of repairs under warranties. Reversal of provisions for warranties has been carried out in 2011 as a result of a better quality level and due to a lower scope of operations in the past three years.

Provisions for retirement benefits and jubilee premiums were created on the basis of the actuarial calculation of estimated future payments of retirement benefits and jubilee premiums, which was made as at 31 December 2011. The actuarial calculation was based on the following assumptions:

• a discount rate of 5.10 % in December 2011 representing the rate of return on 10-year entrepreneurial bonds with high credit rating in the euro area; 
• current retirement benefits and jubilee premiums as defined in the internal acts of individual companies or in the national regulations;
• an employee turnover depending in particular on the employee's age;
• a mortality rate stated in the latest available mortality tables of the local population;
• an increase in wages and salaries due to adjustment for inflation and career promotion.

Actuarial deficits or surpluses occurring in connection with retirement benefits and jubilee premiums are recognised in the income statement as expense (income).

A significant portion of other long-term provisions includes provisions for corporate restructuring and anticipated losses, which were created in 2010 in line with the anticipated costs of post-acquisition activities for the Asko Group (whereas they were partly already used or reversed in 2011 for the stated purposes), provisions for costs in connection with the Directive on Waste Electrical and Electronic Equipment recorded by ZEOS, d.o.o., and provisions for compensation claims arising from legal actions brought against Gorenje, d.d.