E_mg_GB_03_vorne-29_3_04

MANAGEMENT SHARE STRATEGY SPECIAL SECTION MANAGEMENT REPORT FINANCIAL STATEMENTS FURTHER INFORMATION
Consolidated Balance Sheets • Statements of Income • Statements of Cash Flows • Statements of Changes in shareholders’ Equity • Fixed Assets Schedule • Notes • Independent Auditors’ Report
accepted. In addition to guarantees explicitly agreed by contract, many countries also recognize
product liability arrangements, which in some cases may stipulate that the manufacturer is liable
beyond the contractually agreed life of the guarantee. If the products, plant or equipment sold fail
to meet the contractually agreed specifications, the mg Group will be faced with claims under its
guarantee. In some cases the mg Group can demand collateral in the form of insurance premium
refunds or guarantees from subcontractors.
Provisions for guarantees are set aside on the basis of empirical values from similar products or
based on the evaluated overall risk of the plant or equipment in question. The percentage of sales
set aside as a provision will vary depending on the type of product, plant or equipment (general
provision). General provisions are recognized at the time of final acceptance by the customer of
the product, plant or equipment if the contract in question is accounted for under the completedcontract
method. If it is accounted for under the PoC method, provisions are set aside according to
the contract’s percentage of completion. If a claim is made under a guarantee and a loss is deemed
likely, specific guarantee provisions are set aside to cover the anticipated cost (specific provisions).
The restructuring provisions largely relate to the reorganization of the remaining activities in
connection with the strategic restructuring of the mg Group. For further information see Note
H) ‘Restructuring’. Provisions of a83.736 million have been set aside for the future cost of reorganization.
Personnel-related measures will account for a67.639 million of this amount. The majority
of this cost relates to continued salary payments and severance payments to employees under
social plans. The exit costs of a16.097 million concern plans to divest or merge certain industrial
plant engineering activities (for further information see Note 18) ‘Restructuring Costs’).
The changes in these restructuring provisions are summarized as follows:
Personnel-Related
Obligations Exit Costs Total
t ’000 t ’000 u ’000
Balance at 9/30/2002 14,673 7,401 22,074
Additional charges 3,388 4 3,392
Amounts utilized 5,485 591 6,076
Amounts reversed 540 68 608
Acquisitions - - -
Balance at 12/31/2002 12,036 6,746 18,782
Additional charges 64,720 11,679 76,399
Amounts utilized 7,978 3,534 11,512
Amounts reversed 1,157 10 1,167
Acquisitions 18 1,216 1,234
Balance at 12/31/2003 67,639 16,097 83,736
The a1.234 million increase in restructuring provisions owing to acquisitions resulted from the acquisition
of Fleissner.
The remaining provisions have essentially been established to cover risks arising from litigation as well
as the cost of legal advice and other advisory costs of a36.763 million (prior year: a32.744 million)
as well as provisions for impending losses of a21.836 million (prior year: a6.763 million).
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