35.1 Accounting policy
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date. Where the effect of the time value of money is material, provisions are discounted using a pre-tax discount rate that reflects both the current market assessment of the time value of money and the specific risks associated with the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
35.2 Analysis of provisions
|Disposal and |
|As at 1 January 2012||38.1||31.5||11.0||80.6|
|Charge to Group income statement||14.3||20.5||5.8||40.6|
|Unwind of discount||1.1||0.7||—||1.8|
|Transferred to liabilities classified as held for sale (note 23)||(0.1)||(0.5)||—||(0.6)|
|Transferred from other payables||0.7||—||—||0.7|
|Demerger of Alent plc business (note 24)||(15.4)||(2.3)||(0.9)||(18.6)|
|As at 31 December 2012||30.1||17.1||14.1||61.3|
Of the total provision balance as at 31 December 2012 of £61.3m (2011: £80.6m), £31.8m (2011: £55.7m) is recognised in the Group balance sheet within non-current liabilities and £29.5m (2011: £24.9m) within current liabilities.
The provision for disposal and closure costs includes the Directors' current best estimate of the costs to be incurred both in the fulfilment of obligations incurred in connection with former Group businesses, resulting from either disposal or closure, together with those related to the demolition and clean-up of closed sites. The provision comprises amounts payable in respect of known or probable costs resulting both from legal or other regulatory requirements, or from third-party claims, including claims relating to product liability. As the settlement of many of the obligations for which provision is made is subject to legal or other regulatory process, the timing of the associated cash outflows is subject to some uncertainty, but the majority of the amounts provided are expected to be utilised over the next five years and the underlying estimates of costs are regularly updated to reflect changed circumstances with regard to individual matters.
The provision for restructuring charges includes the costs of all of the Group's initiatives to rationalise its operating activities. The balance of £17.1m as at 31 December 2012 comprises £5.6m in relation to onerous lease provisions in respect of leases terminating between one and ten years, and £11.5m in relation to future expenditure on restructuring initiatives which is expected to be paid out over the next two years.
Other provisions comprise amounts payable in respect of known or probable costs resulting both from legal or other regulatory requirements, or from third-party claims. As the settlement of many of the obligations for which provision is made is subject to legal or other regulatory process, the timing of the associated outflows is subject to some uncertainty, but the majority of amounts provided are expected to be utilised over the next five years and the underlying estimates of costs are regularly updated to reflect changed circumstances with regard to individual matters.
Where insurance cover exists for any of these known or probable costs, a related asset is recognised in the Group balance sheet only when its realisation is virtually certain. As at 31 December 2012, £10.2m (2011: £8.3m) was recorded in receivables in respect of associated insurance reimbursements, of which £7.9m (2011: £6.3m) is non-current. The amounts reported in the table above as charged to the Group income statement represent only that part of the total income statement charge reported as a movement on provisions. Other components of the charge, such as asset write-offs, are reported as a reduction in the carrying value of the relevant balance sheet item.