ANNUAL REPORT 2008 - Gorenje Group

92
2008
(i) Warranties
A provision for warranties is recognised when the underlying products or services are sold. The
provision is based on historical warranty data and a weighting of all possible outcomes against their
associated probabilities.
Provisions for warranties are decreased directly by expenditure for which they were set up. Such
expenditure is no longer recognised in the income statement for the period. At the end of the period
for which provisions are set up, the total amount of unused provisions is transferred to other
operating income.
(ii) Site restoration
In accordance with the Group’s published environmental policy and applicable legal requirements,
a provision for site restoration in respect of contaminated land, and the related expense, is recognised
when the land is contaminated.
(iii) Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the
Group from a contract are lower than the unavoidable cost of meeting its obligations under the
contract. The provision is measured at the present value of the lower of the expected cost of terminating
the contract and the expected net cost of continuing with the contract. Before a provision
is established, the Group recognises any impairment loss on the assets associated with that
contract.
(iv) Provisions for termination benefits and jubilee benefits
In accordance with the statutory requirements, the collective agreement, and the internal regulations,
the Group is to pay to its employees jubilee benefits and termination benefit upon retirement.
For these obligations, long-term provisions are formed.
Provisions are determined by discounting, at the balance sheet date, the estimated future benefits
in respect of termination benefits and anniversary bonuses. The obligation is calculated separately
for each employee by estimating the costs of termination benefit upon retirement and the costs
of all expected jubilee benefits until retirement. The selected discount rate is 7.75 % p.a. and represents
the rate of return on long-term government bonds. The calculation is performed by a certified
actuary using the projected unit method.
(m) Revenue
(i) Revenue from the sale of products, merchandise and materials
Revenue from the sale of products, merchandise and materials is measured at the fair value of the
consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Revenue is recognised when the significant risks and rewards of ownership have been transferred
to the buyer, recovery of the consideration is probable, the associated costs and possible return
of goods can be estimated reliably, and there is no continuing management involvement with
the goods.
Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For
sales of goods, transfer usually occurs when the product is received at the customer’s warehouse;
however, for some international shipments transfer occurs upon loading the goods onto the relevant
carrier.