Osim FR 050407.indd

Notes to the Financial Statements - 31 December 2006 (cont’d)24. Provisions (cont’d)CompanyProvision forwarranties(Note A)Provision forredemption ofcustomers’ rewardpoints(Note B)Provision forrestoration costs(Note C)Total2006 2005 2006 2005 2006 2005 2006 2005$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000At beginning of year 239 902 – – 2,507 – 2,746 902Provided during the year 598 239 – – 91 2,507 689 2,746Utilised during the year (431) (902) – – – – (431) (902)Unused amounts reversed during the year – – – – (100) – (100) –At end of year 406 239 – – 2,498 2,507 2,904 2,746Note AProvision for warrantiesThe Group provides a maximum of one year warranty to its customers on certain of its products, during which faultyproducts are repaired or replaced. The amount of the provision for warranty is estimated based on sales volumes andpast experience of the level of repairs and return. The estimation basis is reviewed on an ongoing basis and revised whereappropriate.As at 31 December 2006, the Group provided $1,716,000 (2005: $1,383,000) for expected warranty claims onmerchandise sold during the year. The provision is expected to be incurred in the next fi nancial year.The above provision has not been discounted as the effect of discounting is not signifi cant.Note BProvision for redemption of customers’ reward pointsCustomers, who are VIP members of a subsidiary, are awarded reward points upon purchase of the subsidiary’s products.The provision is calculated based on the estimated value of the reward points, which approximates the cost of the productsto the subsidiary. As at 31 December 2006, the Group provided $1,028,000 (2005: $679,000) for the estimated liabilityof the cost of the products to be redeemed by the customers using the reward points given on the purchases made. Theprovision is expected to be incurred in the next fi nancial year.Note CProvision for restoration costsProvision for restoration costs $3,783,000 (2005: $3,735,000) is the estimated costs of restoring leasehold premises,retails outlets and warehouse, which are capitalised and included in the cost of fi xed assets. The provision is expected tobe incurred at the end of the lease terms.Notes to the Financial Statements 137Annual Report 2006