annual report - Harvey Norman Company Reports & Announcements

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. Provisions (continued)
94
Movements in the provisions for the year are as follows:
CONSOLIDATED
Make Good
Provision
$000
Deferred Lease
Expenses
$000
Onerous Lease
Costs
$000
At 1 July 2011 2,716 6,332 2,426 643 12,117
Arising during the year 2,250 1,153 5,971 488 9,862
Utilised (937) (2,073) (6,287) (394) (9,691)
Other
Discount rate adjustment 9 - - - 9
Exchange rate variance 51 (27) - 9 33
At 30 June 2012
4,089
5,385
2,110
$000
746
Total
$000
12,330
Current 2012 1,061 737 2,110 746 4,654
Non-current 2012 3,028 4,648 - - 7,676
Total provisions 2012
4,089
5,385
2,110
746
12,330
Current 2011 658 1,058 2,426 643 4,785
Non-current 2011 2,058 5,274 - - 7,332
Total provisions 2011
2,716
6,332
2,426
643
12,117
Make good provision
In accordance with certain lease agreements, the consolidated entity is obligated to restore certain leased premises
to a specified condition at the end of the lease term. The balance of the make good provision as at 30 June 2012
was $4.09 million representing the expected costs to be incurred in restoring the leased premises to the condition
specified in the lease. The provision has been calculated using a discount rate of 3 per cent.
Onerous lease costs
The provision for onerous lease costs represents the present value of the future lease payments that the consolidated
entity is presently obligated to make in respect of onerous lease contracts under non-cancellable operating lease
agreements. This obligation may be reduced by the revenue expected to be earned on the lease including
estimated future sub-lease revenue, where applicable. The estimate may vary as a result of changes in the utilisation
of the leased premises and sub-lease arrangements where applicable. The unexpired term of the leases ranges from
1 to 3 years. During the year ended 30 June 2012, the consolidated entity closed four (4) leased franchised stores and
had restructured the company-operated Clive Peeters and Rick Hart business. This restructure resulted in the closure
of seven (7) Clive Peeters and Rick Hart retail sites, all of which were leased from external parties. The balance of the
provision for onerous lease costs as at 30 June 2012 was $2.11 million. The majority of this provision relates to the
franchised and company-operated closures during the current year.
Deferred lease expenses
Deferred lease expenses represent the present value of the future lease payments that the consolidated entity is
presently obligated to make under non-cancellable operating lease agreements to enable the even recognition of
lease payments as an expense on a straight-line basis over the lease term.
Other
The other provisions relates to provisions for employees‟ day in lieu incurred by a controlled entity within the
consolidated entity.