annual report 2004 - Severočeské doly a.s.

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Segments
The Group has only one distinguishable business segment being the mining and selling of lignite. None of the waste
disposal, transportation, engineering and blasting business segments are considered as a reportable segment as
their respective segment revenues, results and total assets are immaterial compared to those of the mining segment.
Contingencies
Contingent assets and liabilities are not recognized in the financial statements. Contingent liabilities are disclosed
unless the possibility of an outflow of economic resources is remote. Contingent assets are disclosed when an inflow
of economic benefits is probable.
Subsequent Events
Post-year-end events that provide additional information about the company’s position at the balance sheet date
(adjusting events), are reflected in the financial statements. Post-year-end events that are not adjusting events
are disclosed in the notes when material.
3. Provisions for Decommissioning, Reclamation and Mining Damages
Composition of provisions for decommissioning, reclamation and mining damages is as follows
(in CZK million):
2004 2003
Decommissioning and Reclamation 7,553 7,307
Mining Damages 1,216 456
Other 23 20
Total provisions 8,792 7,783
Decommissioning and Reclamation
The Czech Republic has adopted a series of environmental acts and laws and regulations (“the Acts”) concerning
reclamation of damaged lands and can impose fines and penalties for not meeting the requirements of the Acts.
The Company is liable under the Acts for continuing restoration of land damaged by its mining activities.
The Company has been restoring areas damaged by mining since 1950. As of the end of 2004 approximately 30 square
kilometers has been fully restored and an additional 26 square kilometers is under restoration. Additional restoration
of land damaged as of December 31, 2004 of approximately 65 square kilometers will be carried out in the future.
The Company has established provisions, as described in Note 2, to recognize its estimated liabilities
for decommissioning and reclamation of the areas damaged by mining. The following is a summary
of the provisions for the years ended December 31, 2004 and 2003 (in CZK million):
Decommissioning and reclamation
Balance at December 31, 2002 7,285
Changes made during 2003:
Discount accretion and effect of inflation 414
Current cash expenditures (392)
Balance at December 31, 2003 7,307
Changes made during 2004:
Discount accretion and effect of inflation 420
Current cash expenditures (312)
Provision 302
Effect of change in estimate (164)
Balance at December 31, 2004 7,553
The provision relates to the extension of the mining area in the respective years. The current cash expenditures
reflect the payments for decommissioning and reclamation works carried out in the year.
In 2004 the Company reassessed the estimated decommissioning and reclamation costs at Mine Bílina and Nástup
resulting in a decrease of CZK 164 million in the present value of best estimate of the expenditures required to settle
the present obligation. Change in estimate was reflected in the accompanying consolidated financial statements as
the deduction from the amount recognized as the related asset included in Property, Plant and Equipment (see Note 4).
The actual decommissioning and reclamation costs could vary substantially from the above estimates because
of new regulatory requirements, changes in technology, increased costs of labor, materials, and equipment and/or
the actual time required to complete all decommissioning and reclamation activities.
Mining Damages
The Company is liable to cover the cost of railway track replacement. The railway track connection Prague – Chomutov
operated by Czech Railways crosses mining areas of the Company. The Company has recorded a provision for such
liability in the total amount of CZK 1,442 million till December 31, 2004. The provision was already draw on as
of December 31, 2004 in total amount of CZK 1,084 million. The total volume of liability at the end of the year