FY 2012 - Investor Relations - NIS

19. LONG – TERM PROVISIONSMovements on the long-term provisions were as follow:As at 1 January2011Charged toConsolidated IncomeStatement (note 28and 32)Adjustments onproperty, plant andequipmentRelease of provision(note 33)AssetretirementobligationEnvironmentalprotectionEmployeesbenefitsprovisionLong-termincentiveprogramLegalclaimsprovisionsTotal8,275,608 962,968 4,746,001 - 4,590,075 18,574,652352,614 176,606 - - - 529,220(1,035,326) - - - - (1,035,326)(326,083) - (1,155,212) - (2,556,637) ( 4,037,932)Settlement - (127,474) (295,108) - (236,381) ( 658,963)As at 31 December2011Charged toConsolidated IncomeStatement (note 28and 32)Adjustments onproperty, plant andequipmentRelease of provision(note 33)7,266,813 1,012,100 3,295,681 - 1,797,057 13,371,651836,334 24,000 787,369 1,042,855 - 2,690,558(82,397) - - - - (82,397)(47,643) - (887,109) - (827,581) (1,762,333)Settlement (1,021) (174,717) (195,421) - (155,430) (526,589)As at 31 December2012(1) Asset retirement obligation7,972,086 861,383 3,000,520 1,042,855 814,046 13,690,890(2) Environmental protectionIn accordance with the applicable laws, the Group has to comply with environmental protection regulations. At thereporting date Group recorded provision for environmental protection of RSD 861,383 (2011: RSD 1,012,100) based onthe management assessment of necessary costs for cleaning up sites and remediation of polluted facilities.(3) Long-term incentive programIn 2011, the Group started setting-up a long-term incentive program for Group managers. Following the program’sapproval, cash incentives will be paid out based on the Key Performance Indicators (“KPI”) reached over a three-yearperiod. As at 31 December 2012 the management made an assement of present value of liabilities related to long-termemployee incentives in amount of RSD 1,042,855 (note 28).(4) Legal claims provisionsАs at 31 December 2012, the Group 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 Group reversed provisionfor litigation amounting to RSD 827,581 (2011: RSD 2,556,637) for proceedings which, upon legal consultations, wereassessed to have positive outcome. The Group estimated that the outcome of all legal proceedings would not lead tomaterial losses exceeding the amount of provision as at 31 December 2012.(5) Employee benefits provisionEmployee benefits:31 December 2012 31 December 2011Retirement allowances 836,998 1,036,927Jubilee awards 2,163,522 2,258,754The principal actuarial assumptions used were as follows:3,000,520 3,295,68131 December 2012 31 December 2011Discount rate 7.65% 7.75%Future salary increases 6% 6%Future average years of service 19.79 18.79The Group’s Management estimates future cash outflows for restoration of natural resources (land) on oil and gas wellsbased on previous experience in similar projects.288 • FINANCIAL STATEMENTS Annual report for 2012Annual report for 2012FINANCIAL STATEMENTS • 289