Page 33 - Annual Report KELAG Group 2018
P. 33

Other provisions are recognised in accordance with the regulations in IAS 37 if the company has
                                      a legal or constructive obligation to a third party based on a past event and it is probable that this
                                      obligation will lead to an outflow of resources. It must be possible to make a reliable estimate of
                                      the amount of the obligation. Provisions are stated at the amount needed to settle the obligation
                                      and are not netted against any rights to reimbursement. The settlement amount is calculated
                                      based on the best estimate of the amount with which a present obligation could be settled or
                                      transferred to a third party on the reporting date. Future cost increases that are foreseeable and
                                      probable as of the reporting date are taken into account.

                                      Provisions for potential losses from onerous contracts are also recognised in KELAG’s consolidated
                                      financial statements in accordance with the requirements of IAS 37. The carrying amount reflects
                                      the amount of the expected unavoidable outflow of resources at full cost. This is the lower amount
                                      of  the  cost  of  fulfilling  the  agreement  and  any  compensation  payments  if  it  is  not  fulfilled.
                                      However,  recognising  impairment  losses  on  assets  associated  with  onerous  contracts  has
                                      precedence over recognising provisions for potential losses.

                                      Non-current provisions are discounted if the present value of the expected settlement amount
                                      differs significantly from its nominal value. As a rule, the provisions due to be settled in more than
                                      12 months are discounted in accordance with the Group’s accounting and measurement rules.
                                      The discount rate is a pre-tax rate adjusted to the debt-specific risks. The amounts from unwinding
                                      the discount are recognised as an interest expense; any effects from interest rate changes are
                                      disclosed under the operating result.
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