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the subsidiaries have a 100% interest in these funds.
Rehabilitation and restoration trust funds holding monies
committed for use in satisfying environmental obligations
are included on a discounted basis within other noncurrent
assets on the statement of financial position, only
to the extent that a liability exists for these obligations.
Environmental expense recoveries are generally
recognized in profit upon final settlement with the
Company’s insurance carriers.
Additional environmental remediation costs and
provisions may be required, if the Company were to decide
to close certain of its sites. Certain of the Company’s
restructuring programs have involved closure of several
sites to date. Remediation liabilities are recognized when
the site closure has been announced. In the opinion of
the Company, it is not possible to estimate reliably the
costs that would be incurred on the eventual closure of
its continuing sites, where there is no present obligation
to remediate, because it is neither possible to determine
a time limit beyond which the sites will no longer be
operated, nor what remediation costs may be required on
their eventual closure.
(ii) Restructuring
A provision for restructuring is recognized when the
Company or a subsidiary of the Company has approved
a detailed and formal restructuring plan, and the
restructuring either has commenced or has been
announced publicly. Provisions are not made for future
operating costs.
(iii) Warranty
A provision for warranty is recognized when the Company
or a subsidiary of the Company has determined that it
has a basis for recording a warranty provision based on
historical returns for warranty work.
(iv) Partial retirement
In an effort to reduce unemployment and create jobs
for younger job-seekers, Germany implemented certain
regulations in 1996 to enable employees to take early
retirement. Although the law is no longer in effect, the
Company’s German subsidiaries have made provisions for
those employees who are eligible per their employment
contracts. According to German law, the Company is
required to pay a deposit for partial retirements to secure
payments to the employees in the case of insolvency. The
Company records the related deposits and provisions on a
net basis.
(v) Cost estimates
As part of its process to provide reliable estimations of
profitability for long-term contracts, the Company makes
provisions for cost estimates. These provisions are
developed on a contract by contract basis and are based
on contractor estimates.
(n) Revenue
(i) Goods sold
Revenue from the sale of goods is measured at the
fair value of the consideration received or receivable.
Revenue from product sales to the Company’s customers
is recognized when the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably,
and there is no continuing management involvement with
the goods.
Transfer of risks and rewards usually occurs when title
and risk of loss pass to the customer. In the case of export
sales, title may not pass until the product reaches a
foreign port.
(ii) Furnace construction contracts
Certain furnace construction contracts are reported using
the percentage of completion (“POC”) method. Cumulative
work and services performed to date, including the
Company’s share of profit, is reported on a pro rata basis
according to the percentage completed. The percentage
of completion is measured as the ratio of contract costs
incurred for work performed so far to total contract costs
(cost-to-cost method). Contracts are reported in trade
receivables and advance payments, as “gross amount
due to / from customers for/from contract work (POC)”.
If cumulative work performed to date (contract costs
plus contract net profit) of contracts in progress exceeds
progress payments received, the difference is recognized
as an asset and included in trade and other receivables in
the consolidated statement of financial position. If the net
amount after deduction of progress payments received
is negative, the difference is recognized as a liability
and included in advance payments in the consolidated
statement of financial position. Anticipated losses on
specific contracts are estimated taking account of all
identifiable risks and are accounted for using the POC
method. Contract income is recognized according to
the income stipulated in the contract and/or any change
orders confirmed in writing by the client.
(iii) Commissions
In certain instances, the Company arranges sales for
which the supplier invoices the customer directly. In such
Notes to Consolidated Financial Statements 87