FY 2012 - Investor Relations - NIS

19. LONG – TERM PROVISIONSMovements on the long-term provisions were as follow:As at 1 January2011Chargedto Incomestatement (note28 and 32)Adjustments onproperty, plantand equipmentRelease ofprovision (note33)AssetretirementobligationEnvironmentalprotectionEmployeesbenefitsprovisionLongtermincentiveprogramLegalclaimsprovisionsTotal8,275,608 962,968 4,729,374 - 4,533,590 18,501,540352,614 176,606 - - - 529,220(1,035,326) - - - - (1,035,326)(326,083) - (1,140,172) - (2,505,737) (3,971,992)Settlement - (127,474) (295,108) - (235,396) (657,978)As at 31December 2011Chargedto Incomestatement (note28 and 32)Adjustments onproperty, plantand equipmentRelease ofprovision (note33)7,266,813 1,012,100 3,294,094 - 1,792,457 13,365,464836,334 24,000 - 1,042,855 - 1,903,189(82,397) - - - - (82,397)(47,643) - (887,109) - (827,582) (1,762,334)Settlement (1,021) (174,717) (162,420) - (155,429) (493,587)(2) Environmental protectionIn accordance with the applicable laws, the Company has to comply with environmental protection regulations. At thereporting date Company recorded provision for environmental protection of RSD 861,383 (2011: RSD 1,012,100) basedon the management assessment of necessary costs for cleaning up sites and remediation of polluted facilities.(3) Long-term incentive programIn 2011, the Company started setting-up a long-term incentive program for Company managers. Following theprogram’s approval, cash incentives will be paid out based on the Key Performance Indicators (“KPI”) reached over athree-year period. As at 31 December 2012 the management made an assessment of present value of liabilities relatedto long-term employee incentives in amount of RSD 1,042,855 (note 28).(4) Legal claims provisionsAs at 31 December 2012, the Company assessed the probability of negative outcomes of legal procedures, as well as theamounts of probable losses based on the information provided by the Legal Division. The Company reversed provisionfor litigation amounting to RSD 827,582 (2011: RSD 2,505,737) for proceedings which, upon legal consultations, wereassessed to have positive outcome. The Company estimated that the outcome of all legal proceedings would not leadto material losses exceeding the amount of provision as at 31 December 2012.(5) Employee benefits provisionEmployee benefits:31 December 2012 31 December 2011Retirement allowances 622,739 1,035,340Jubilee awards 1,621,826 2,258,754The principal actuarial assumptions used were as follows:2,244,565 3,294,09431 December 2012 31 December 2011Discount rate 7,65% 7,75%Future salary increases 6% 6%Future average years of service 19,79 18,79As at 31December 20127,972,086 861,383 2,244,565 1,042,855 809,446 12,930,335(1) Asset retirement obligationManagement estimates future cash outflows for restoration of natural resources (land) on oil and gas wells based onprevious experience in similar projects.210 • FINANCIAL STATEMENTS Annual report for 2012Annual report for 2012FINANCIAL STATEMENTS • 211