Accounting policy
Provisions are recognized when there is a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. The underlying assumptions in the recognition of provisions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In cases where the effect of the time value of money is material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognized as financial expense.
Differences between the final obligations and the initial estimates are recognized in the consolidated income statement in the period in which such determination is made.
Estimates and judgments
Key estimates made in the accounting for provisions relate to the estimates made in determining the likelihood and timing of potential cash flows included in their measurement.
|
|
Restructuring costs and termination benefits |
|
Environmental costs |
|
Other provisions |
|
Total |
|---|---|---|---|---|---|---|---|---|
Balance at 1 January 2022 |
|
53 |
|
37 |
|
34 |
|
124 |
Of which current |
|
49 |
|
4 |
|
10 |
|
63 |
|
|
|
|
|
|
|
|
|
Changes: |
|
|
|
|
|
|
|
|
- Additions |
|
44 |
|
- |
|
8 |
|
52 |
- Releases |
|
(15) |
|
(5) |
|
(8) |
|
(28) |
- Uses |
|
(41) |
|
(3) |
|
(7) |
|
(51) |
- Other change |
|
- |
|
- |
|
(2) |
|
(2) |
Total changes |
|
(12) |
|
(8) |
|
(9) |
|
(29) |
|
|
|
|
|
|
|
|
|
Balance at 31 December 2022 |
|
41 |
|
29 |
|
25 |
|
95 |
Of which current |
|
39 |
|
2 |
|
4 |
|
45 |
|
|
|
|
|
|
|
|
|
Changes: |
|
|
|
|
|
|
|
|
- Acquisition |
|
3 |
|
- |
|
46 |
|
49 |
- Additions |
|
102 |
|
4 |
|
40 |
|
146 |
- Releases |
|
(9) |
|
- |
|
(21) |
|
(30) |
- Uses |
|
(66) |
|
(3) |
|
(16) |
|
(85) |
- Other change |
|
1 |
|
3 |
|
(3) |
|
1 |
Total changes |
|
31 |
|
4 |
|
46 |
|
81 |
|
|
|
|
|
|
|
|
|
Balance at 31 December 2023 |
|
72 |
|
33 |
|
71 |
|
176 |
Of which current |
|
25 |
|
3 |
|
6 |
|
34 |
In cases where the effect of the time value of money is material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The rate used for discounting decreased from 4.2% to 3.5%. Depending on the risk profile, the discount rates used at the end of 2023 vary from 3.5% to 5.7% (2022: 4.2% to 5.8%). The balance of provisions measured at present value increased by less than €2 million in 2023 in view of the passage of time (similar to 2022).
The provisions for restructuring costs and termination benefits mainly relate to the costs of redundancy schemes connected to the dismissal of employees and costs of termination of contracts. These provisions generally have a term of one to three years.
The restructuring program following up on the change in strategy, aiming to concentrate on Health, Nutrition and Bioscience, which was launched at the end of 2021, was finalized in 2023, with €8 million being used during the year. Furthermore, a restructuring program following up on (the preparation of) the merger of DSM with Firmenich, which was launched in 2022, was also continued. An additional €8 million was recognized for this program, and €9 million was used during the year. Following the announcement of the closure of the Pinova ingredients plant, a provision of €52 million was created, of which €23 million was used so far. In addition, a restructuring provision of €26 million was created, following the announced restructuring of the vitamin asset footprint, of which €12 million was used so far. The other additions to the provisions for restructuring costs and termination benefits in 2023 relate mainly to the various smaller restructuring projects (same as in 2022).
The provisions for environmental costs relate to soil clean-up obligations, among other things. These provisions have an average life of around 30 years.
Several items have been combined under Other provisions, for example, demolition costs, onerous contracts and legal claims. These provisions have an average life of one to 10 years.