Financial Information - Uralita

FINANCIAL INFORMATION ANNUAL REPORT 2006
4.12. Termination indemnities
Under current labour legislation, employers are
required to make indemnity payments to
employees terminated without just cause. The
cost of these indemnities is recorded in the year
in which the termination of the employee’s
contract is agreed on.
Provisions, which are estimated based on the
best available information as to the
consequences of the events giving rise thereto
and which are re-estimated at each reporting
date, are applied to meet the specific and
probable risks for which they were initially
recognized and are reversed, totally or partially,
whenever said risks disappear or diminish.
The Group’s policy is to record provisions for
future payments arising from these plans at the
time the restructuring is approved by the
Directors, publicly announced and
communicated to employees based on the best
available estimates of the potential costs in
accordance with the corresponding actuarial
studies.
At 31 December 2006 and 2005 liabilities
relating to existing redundancy plans were
recorded under “Provisions” on the consolidated
balance sheet at that date.
4.13. Provisions
The Group’s consolidated annual accounts
contain all provisions that cover obligations
existing at the balance sheet date arising as a
consequence of past events that could give
undermine the companies’ equity, the nature of
which is certain but the amount and timing of
which cannot be determined. This includes all
provisions where the probability of having to
cover the commitments is estimated to be higher
than the probability of not having to cover the
commitments.
Unsettled claims and litigation
At year-end 2006 certain judicial proceedings
and claims made against consolidated
companies arising in the ordinary course of
business were still underway. The Group’s legal
counsel and Directors estimate that the
resolution of these proceedings and claims will
produce no material effect on the annual
accounts of the years in which they are resolved.
Provisions for guarantees
Provisions for the cost of guarantees provided
are recognized at the date of sale of the related
products based on the Directors’ best estimate
of the expense and the amount necessary to
settle the Group’s liability.
4.14. Deferred income
This corresponds primarily to non-repayable
capital grants, which are measured at the
amount given and taken to profit or loss under
“Other operating income” in proportion to the
periodic depreciation of the subsidised assets,
except in the case of non-depreciable assets, the
subsidies for which are recognized in income in
the year in which the related assets are disposed
of or derecognized.
147