2005 - The Weir Group

Notes to the Financial Statements (Continued)
25. Provisions
Discontinued
operations
Onerous sales warranty and Deferred
Warranties contracts indemnity Rationalisation consideration Other Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2005 8,703 - - 1,494 1,274 6,905 18,376
Acquisition of subsidiary 649 2,183 - - - 2,615 5,447
Disposal of subsidiaries (127) - 11,425 - - (492) 10,806
Additions 8,384 602 - 22,171 - 1,437 32,594
Utilised (5,304) (502) (1,689) (17,825) (432) (1,681) (27,433)
Unused (69) - - (18) - (11) (98)
Exchange adjustment 195 24 - (18) 49 769 1,019
At 30 December 2005 12,431 2,307 9,736 5,804 891 9,542 40,711
Current 2005 8,449 2,307 6,376 4,510 891 3,584 26,117
Non-current 2005 3,982 - 3,360 1,294 - 5,958 14,594
12,431 2,307 9,736 5,804 891 9,542 40,711
Current 2004 7,197 - - 563 1,274 2,384 11,418
Non-current 2004 1,506 - - 931 - 4,521 6,958
8,703 - - 1,494 1,274 6,905 18,376
Warranties
Provision has been made in respect of actual warranty and contract penalty claims on goods sold and services provided and allowance has been made
for potential warranty claims based on past experience for goods and services sold with a warranty guarantee. It is expected that all costs related to such
claims will have been incurred within five years of the balance sheet date.
Onerous sales contracts
Provision has been made in respect of sales contracts entered into for the sale of goods in the normal course of business where the unavoidable costs of
meeting the obligations under the contracts exceed the economic benefits expected to be received from the contracts. Provision is made immediately
when it becomes apparent that expected costs will exceed the expected benefits of the contract. It is expected that the costs will be incurred within
one year of the balance sheet date.
Discontinued operations warranty and indemnity
During the year, the Company provided in full for residual liabilities of discontinued operations for which the Company retains responsibility. The provision
is based on management's current best estimate. The actual outcome may differ, and in some cases, this will be dependent on the outcome of legal
proceedings. It is expected that the majority of these costs will be incurred within one year with the remaining costs expected to be incurred within
five years of the balance sheet date.
Rationalisation
Rationalisation provisions relate primarily to the remaining costs to be expensed under the restructuring activities of our UK Engineering Products businesses
as described in note 5. It is expected that the majority of this provision will be utilised in 2006 with remaining lease obligations costs being incurred in the
period up to 2010.
Deferred consideration
Deferred consideration relates to the final earn out payment on a previous year's acquisition. It is expected that this cost will be incurred in 2006.
Other
Other provisions relate principally to an environmental clean up programme in the United States, for a company acquired in 1992 and employment related
provisions in the UK, Australia, South America and Europe. The environmental provision is based on management's current best estimate of the expected
costs under the programme. It is expected that these costs will be incurred in the period up to 2019. The employment related provisions arise from legal
obligations in various countries where full provision is made based on the number of employees in the companies.
76 The Weir Group PLC Annual Report 2005