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9 - Provisions and contingent liabilities

Accounting policies

General

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the obligation can be made. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset. However, this is only done when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss, net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is applied, the increase in the provision due to the passage of time is recognized as a finance cost.

Provisions for warranty and claims

The provision for warranty and claims covers the best effort cost-estimation for costs on completed contracts as well as material disputes and claims on projects and contracts in progress. The estimate of warranty-related costs is revised annually.

Provisions for long-service payments

Provision for long-service payments cover future economic outflows for long-term service contracts with customers considering expiration date and type of performance. Estimation is based on last years’ financial performances.

Provisions for onerous contracts

If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before establishing a separate provision for an onerous contract, the Group first recognizes any impairment loss that has occurred on assets related to that contract.

An onerous contract is one where the unavoidable costs of meeting the obligations under contract exceed the expected economic benefits. These costs reflect the lower of the net cost of exiting or fulfilling the contract, including any compensation or penalties for failure to fulfill it. The cost of fulfilling a contract includes all costs directly related to the contract, both incremental costs and an allocation of costs directly related to contract activities.

The Group has early adopted the IAS 37 amendment, which permits the inclusion of directly related overhead costs in the provision.

Contingent liabilities

Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of future events not wholly within the control of the Group, are not recognized in the financial statements but are disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered remote.

Source of Estimation Uncertainty

The group is periodically involved in various legal proceedings, disputes, and claims, including regulatory matters related to the Group’s business, licenses, tax positions, and investments. The outcomes of these instances are subject to significant uncertainty. Management evaluates factors such as the probability of an unfavorable outcome and the ability to make a reasonable loss estimate. Unexpected events or changes in these factors may lead the Group to increase or decrease the amount recorded for a matter not previously recorded because it was not considered probable.

The movement in provision is summarized in the table below (in € 1,000):

Amounts in 1,000 euros

Warranty and claims

Provision for long-service contracts

Provision for deferred taxes

Other provisions

Total

As of January 1, 2022

5,068

1,014

5,875

1,818

13,775

Arising during the period

4,606

-

291

419

5,316

Utilized

-1,079

-

-1,376

-34

-2,489

Unused amount reversed

-1,758

-276

-

-23

-2,057

Transfer / reclassification

-

-

-

500

500

Acquired via acquisitions

90

-

-

-

90

As of December 31, 2022

6,928

737

4,790

2,680

15,135

Current

1,897

369

740

319

2,997

Non-current

4,293

368

4,050

2,361

12,138

      

As of January 1, 2023

6,928

737

4,790

2,680

15,135

Arising during the period

4,593

113

1,701

511

6,918

Utilized

-1,370

-

-740

-50

-2,160

Unused amount reversed

-5,527

-

-

-191

-5,718

Transfer / reclassification

-207

-

-

207

-

Other adjustments

-

-

-

-

-

As of December 31, 2023

4,417

850

5,751

3,155

14,173

Current

4,020

425

740

2,041

7,226

Non-current

397

425

5,011

1,114

6,947

In 2022, an amount was recorded under "other provisions" for an onerous contract. There was no change to this in 2023. In 2023 the group evaluated the allocation method for the warranty provision using a benchmark with other companies. This led to a reduction in the annual percentage of addition to the provisions as well as limitation of revenue categories with material warranty risk. This has led to a relatively high release in 2023.

Guarantees

As at December 31, 2023, bank guarantees issued to third parties for a total of € 7.7 million (2022: € 9.6 million).

The Group has provided corporate guarantees to customers of companies within the Group. As at December 31, 2023, totaling € 5.2 million (compared to corporate guarantees totaling €3.0 million in 2022).

The Group is a partner in several general partnerships (V.O.F.) and, as such, carries joint and several liability for the debts of these partnerships. For a detailed list of these partnerships, refer to Note 1: Group Structure.

Other provisions

Other provisions include the jubilee provision and provision for contracts considered onerous (the latter at both balance sheet dates €500,000), totaling € 2,5 million as at December 31, 2023 (2022: € 2.4 million).