13 Other Provisions / Income Tax Provisions

Provisions for Personnel

These include obligations for anniversary payments and funeral expenses as well as provisions for early-retirement and phased-early-retirement plans. There is a continuous reduction in noncurrent provisions for anniversary payments and provisions for phased-early-retirement plans. Interest-rate effects increased anniversary-payment provisions, while provisions for phased-early-retirement plans increased due to newly concluded agreements with employees still working for the company.

Sales / Purchasing Provisions

These provisions cover warranty and product-liability obligations as well as commissions payable to sales agents and contingent losses from contractual agreements. The major portion of the provisions will probably be used for payouts over the next two years. The decrease in this item is attributable to the utilization of provisions for onerous contracts and to the reclassification of discount accruals as contract liabilities.

Provisions for Environmental Protection

Provisions for environmental protection are created for anticipated obligations regarding contaminated-site remediation, water pollution control, recultivation of landfills, the clean-up of contaminated storage and production sites, and similar environmental measures. These provisions also include environmental protection charges likely to be imposed by government agencies. The noncurrent provisions for environmental protection are likely to be utilized within a period of 25 years.

Sundry Provisions

These provisions are formed for a multiplicity of identifiable individual risks and contingencies (e. g. damages, reimbursement claims, legal expenses). Beside risks in connection with property and wealth taxes, they cover risks stemming from interest and penalties not recognized under income taxes.

Income Tax Provisions

These contain amounts for current income tax obligations as well as for risks from tax audits and legal action. The existing noncurrent tax provisions will probably not be utilized for another four years.

Depending on the situation in the individual countries, discount rates of up to 5 percent were used to determine the provisions. These provisions were primarily those associated with purchasing, environmental provisions, provisions for phased-early-retirement plans and anniversary-payment provisions.