GSK Annual Report 2002

98 GlaxoSmithKline Notes to the financial statements
23 Provisions for
liabilities and charges
Pensions and other
post-retirement
benefits
Manufacturing
restructuring
Merger
integration
Legal
and other
disputes
Deferred
taxation
Other
provisions Total
£m £m £m £m £m £m £m
At 1st January 2002 as previously reported 1,022 126 240 227 – 195 1,810
Prior year adjustment (Note 12) – – – – 553 – 553
At 1st January 2002 as restated 1,022 126 240 227 553 195 2,363
Exchange adjustments (69) (2) (8) (44) 12 (12) (123)
Charge for the year 198 32 379 304 14 4 931
Applied (335) (52) (203) (72) – (17) (679)
Reclassifications and other movements 105 (1) (5) 92 163 (13) 341
At 31st December 2002 921 103 403 507 742 157 2,833
In December 2002, the Group made special cash contributions totalling £320 million into the UK, US and German pension schemes. The
contributions relating to the US and German pension schemes are included within the amounts applied to the provision above; the
contribution relating to the UK pension scheme has increased the prepayment amount shown under debtors in Note 21.
The Group has recognised costs in 2002 in respect of plans for manufacturing and other restructuring initiated in 1998, 1999 and in 2001
following the merger of Glaxo Wellcome and SmithKline Beecham and acquisition of Block Drug. These plans are largely to be completed
during 2003. Costs recognised as a provision, principally in respect of identified severances at sites where it has been announced that
manufacturing activities will cease, are expected to be incurred mainly in 2003. Costs of asset write-downs have been recognised as an
impairment of fixed assets.
The Group has recognised costs in 2001 and 2002 in respect of plans for the integration of the Glaxo Wellcome and SmithKline Beecham
businesses. Additional costs will be incurred as implementation of the integration following the merger continues. Costs recognised as a
provision in respect of identified severances are expected to be incurred in 2003, and in respect of the programme to encourage staff to
convert Glaxo Wellcome or SmithKline Beecham share options into GlaxoSmithKline share options when employees exercise these options.
Provisions for legal and other disputes and other matters include amounts relating to US anti-trust, product liability, contract terminations,
self-insurance, environmental clean-up and property rental. The company’s Directors, having taken legal advice, have established provisions
after taking into account insurance and other agreements and having regard to the relevant facts and circumstances of each matter and in
accordance with accounting requirements. No provisions have been made for unasserted claims. The ultimate liability for such matters may
vary from the amounts provided and is dependent upon the outcome of litigation proceedings, investigations and possible settlement
negotiations.
GlaxoSmithKline is involved in a number of legal and other disputes (including notification of possible claims) where, because of the early
stage of the matter, no reliable estimate of the outcome can be made. Accordingly no provision has been recorded for these matters or
any unasserted claims.
It is in the nature of the Group’s business that a number of these matters may be the subject of negotiation and litigation over several
years. The largest individual amounts provided are expected to be settled within two years.
For a discussion of litigation issues, refer to ‘Legal proceedings’ in Note 30.
24 Contingent liabilities
Contingent liabilities, comprising guarantees, discounted bills and other items arising in the normal course of business, amounted at
31st December 2002 to £138 million (2001 – £90 million).