G4S Annual Report and Accounts 2011

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Overview Strategic review Performance Notes to the consolidated financial statements continued 35 Provisions Employee benefits £m Restructuring £m Claims reserves £m Onerous contracts £m At 1 January 2011 16 5 42 16 79 Additional provision in the year 10 – 27 7 44 On acquisition of subsidiary – – 1 – 1 Utilisation of provision (7) (4) (23) (10) (44) Unused amounts reversed (2) – (11) – (13) Translation adjustments – – 1 – 1 At 31 December 2011 17 1 37 13 68 Total £m Included in current liabilities 30 Included in non-current liabilities 38 68 Employee benefits The provision for employee benefits is in respect of any employee benefits which accrue over the working lives of the employees, typically including items such as long service awards and termination indemnity schemes. Restructuring Restructuring provisions include amounts for redundancy payments, and the costs of closure of activities in acquired businesses and discontinued operations. Settlement of restructuring provisions is highly probable. The timing is uncertain but is generally likely to be short term. Claims reserves The claims reserves are held by the wholly-owned captive insurance subsidiaries in Guernsey and the US which underwrite part of the group’s cash solutions, general liability, workers’ compensation and auto liability policies. The provisions are subject to regular actuarial review and are adjusted as appropriate. Settlement of these provisions is highly probable but both the value of the final settlements and their timing is uncertain, dependent upon the outcome of ongoing processes to determine both liability and quantum in respect of a wide range of claims or possible claims. Onerous contracts The onerous contract provision mainly comprises the provision against future liabilities for loss-making contracts, for all properties sub-let at a shortfall, for the cost of replacing assets where there is a present contractual requirement and for long-term idle, leased properties. The provision is based on the value of future net cash outflows. Whilst the likelihood of settlement of these obligations is considered probable, there is uncertainty over their value and duration. 116 G4S plc Annual Report and Accounts 2011
Governance Financial statements Shareholder information 36 Deferred tax The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current and prior reporting periods: Retirement benefit obligations £m Intangible assets £m Tax losses £m Other temporary differences £m At 1 January 2010 92 (106) 28 42 56 (Charge)/credit to the income statement (11) 26 (2) (3) 10 Acquisition of subsidiaries – (3) – – (3) Disposal of subsidiaries – 2 – – 2 (Charge)/credit to equity (7) – – 5 (2) Translation adjustments 1 (3) 1 1 – At 31 December 2010 75 (84) 27 45 63 At 1 January 2011 75 (84) 27 45 63 (Charge)/credit to the income statement (11) 25 (4) – 10 Acquisition of subsidiaries – (19) – – (19) Credit/(charge) to equity 12 – – (1) 11 Transfers/other – 1 – 1 2 At 31 December 2011 76 (77) 23 45 67 Total £m Certain deferred tax assets and liabilities have been offset where permitted. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes: 2011 £m 2010 £m Deferred tax liabilities (90) (98) Deferred tax assets 157 161 Total deferred tax position 67 63 At 31 December 2011, the group has unutilised tax losses of approximately £456m (2010: £526m) potentially available for offset against future profits. A deferred tax asset of £23m (2010: £27m) has been recognised in respect of approximately £71m (2010: £76m) of gross losses. No deferred tax asset has been recognised in respect of the remaining £385m (2010: £450m) of gross losses due to the unpredictability of future profit streams in the relevant jurisdictions and the fact that a significant proportion of such losses remains unaudited by the relevant tax authorities. Included in unrecognised tax losses are gross losses of £4m, £2m, £1m, £2m and £3m which will expire in 2012, 2013, 2014, 2015 and 2016 respectively. Other losses may be carried forward indefinitely. At 31 December 2011, the aggregate amount of temporary differences associated with undistributed earnings of non-UK subsidiaries for which deferred tax liabilities have not been recognised is £1,401m (2010: £1,445m). No liability has been recognised in respect of these gross differences on the basis that the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. Temporary differences arising in connection with interests in associates and joint ventures are insignificant. At 31 December 2011, the group has total unprovided contingent tax liabilities of approximately £11m (2010: £8m) relating to unresolved tax issues in various jurisdictions. G4S plc Annual Report and Accounts 2011 117
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