(27) Other provisions
Other provisions developed as follows:
€ million |
|
Litigation |
|
Restructuring |
|
Environmental protection |
|
Acceptance and |
|
Interest and penalties related to income taxes |
|
Other |
|
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 1, 2023 |
|
85 |
|
134 |
|
148 |
|
127 |
|
88 |
|
91 |
|
672 |
Additions |
|
10 |
|
173 |
|
3 |
|
124 |
|
80 |
|
89 |
|
479 |
Utilizations |
|
-10 |
|
-45 |
|
-4 |
|
-12 |
|
-1 |
|
-22 |
|
-95 |
Release |
|
-25 |
|
-51 |
|
-3 |
|
-59 |
|
-39 |
|
-29 |
|
-205 |
Interest effect |
|
– |
|
– |
|
5 |
|
– |
|
– |
|
– |
|
6 |
Currency translation |
|
– |
|
-1 |
|
– |
|
– |
|
-1 |
|
-2 |
|
-4 |
Changes in scope of consolidation/Other |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
Dec. 31, 2023 |
|
59 |
|
210 |
|
149 |
|
181 |
|
127 |
|
127 |
|
852 |
thereof: current |
|
42 |
|
139 |
|
19 |
|
166 |
|
127 |
|
82 |
|
575 |
thereof: non-current |
|
17 |
|
71 |
|
130 |
|
15 |
|
– |
|
45 |
|
277 |
Accounting and measurement policies
Provisions for litigation
To assess a recognition obligation in relation to provisions for litigation and to quantify future outflows of resources, the Group draws on the knowledge of the legal department as well as outside counsel.
Assessing the need for recognizing provisions for litigation is based on the likelihood of possible outcomes for proceedings. In particular, the factors influencing this likelihood are:
- the validity of the arguments brought forward by the opposing party, and
- the legal situation and current court rulings in comparable proceedings in the jurisdiction(s) in question.
The following factors are also relevant in measuring provisions for litigation:
- the duration of proceedings in pending legal disputes,
- the applicable license rate plus an expected infringement surcharge,
- the usual damages and fines for comparable legal disputes, and
- the discount factor to be used.
Provisions for restructuring
The Group uses formal restructuring plans and the expectations of the affected employees concerning the performance of the restructuring measures to assess the recognition obligation for provisions for restructuring projects and the amount of the expected outflow of resources.
Provisions for environmental protection
To assess a recognition obligation in relation to provisions for environmental protection and to quantify future outflows of resources, the Group draws on appraisals by independent external experts and the knowledge of in-house specialists.
The following are key parameters in calculating the present value of the future settlement amount of the provisions for environmental protection:
- the future settlement date,
- the extent of environmental damage,
- the applicable remediation methods,
- the associated future costs, and
- the discount factor.
Provisions for acceptance and follow-on obligations
The assessment of the recognition obligation for provisions for acceptance and follow-on obligations and the quantification of future outflows of resources is based on internal project plans as well as on the assessment of the respective matters by in-house and external specialists.
The main parameters in determining the amount of the provision are:
- the ability to use or potential for modification of secured manufacturing capacities at third-party providers, particularly for pharmaceutical compounds,
- the number of affected patients and the expected duration of their continued treatment in clinical development programs,
- the expected date or period of the outflow of resources, and
- the expectations concerning future events influencing the obligations.
Provisions for interest and penalties related to income taxes
Objective assessments are performed to determine the need to recognize provisions for interest and penalties related to income taxes not covered by IAS 12.
Significant discretion and sources of estimation uncertainty
Provisions for litigation
Like the measurement of provisions, the assessment of a recognition obligation for provisions for litigation is to a particular extent subject to a degree of estimation uncertainty. The uncertainties relate, in particular, to the assessment of the likelihood and the amount of the outflow of resources.
Provisions for restructuring
Estimation uncertainty about the provisions for restructuring primarily relates to determining the amount of the expected outflow of resources. This is largely influenced by the assumptions made concerning the change in or termination of the employment relationships of the affected employees and the planned implementation date of the restructuring plan.
Provisions for environmental protection
The assessment of a recognition obligation and the measurement of the provisions for environmental protection are subject to discretionary decisions and estimation uncertainties to a particular degree.
The estimation uncertainties relate in particular to the assessment of the timing and likelihood of a future outflow of resources and the extent of necessary remediation measures as well as the related calculation of the amount of the liability.
Provisions for acceptance and follow-on obligations
Estimation uncertainty regarding the provisions for acceptance and follow-on obligations primarily relates to determining the amount of the expected outflow of resources.
Provisions for interest and penalties related to income taxes
Estimation uncertainty concerning the provisions for interest and penalties related to income taxes mainly relates to the interpretation of tax codes and the effects of amended case law.
Antitrust and other proceedings
In connection with the generics business that was divested in 2007, the Group was accused of breaching EU antitrust law through agreements entered into by its former subsidiary Generics (UK) Ltd., United Kingdom, relating to the antidepressant Citalopram patented by Lundbeck A/S, Denmark. The European Commission imposed a fine in June 2013. Appeals against the decision were unsuccessful. Following the payment of the fine of around € 18 million, British health authorities brought legal claims for damages against the Group and other companies in a mid-triple-digit million-euro amount in fiscal 2023 due to alleged infringements of competition law. In addition, there were further claimants from various other jurisdictions who have not yet quantified their claims. In response to the latest developments in the proceedings, the provision was adjusted as of December 31, 2023, and is now recognized in a high-single-digit million-euro amount. A cash outflow within the next 12 months is considered possible.
Restructuring
The restructuring provisions recognized as of December 31, 2023, primarily relate to obligations for workforce reduction measures in connection with communicated restructuring plans.
A program to continuously improve processes and align the Group functions more closely with the businesses was launched in 2023. The implementation of this program will take until at least the end of fiscal 2024. Provisions in a mid-double-digit million-euro amount were recognized for the program in the current fiscal year. Furthermore, additional programs to improve efficiency and increase customer focus in the Electronics and Healthcare business sectors were initiated during the current fiscal year. This resulted in the recognition of provisions in a mid-double-digit million-euro amount that are largely expected to be utilized within the next two years.
Environmental protection
Provisions for environmental protection resulted in particular from obligations for soil remediation and groundwater protection in connection with the crop protection business in Germany and Latin America that was discontinued in 1987.
Acceptance and follow-on obligations
Provisions for acceptance and follow-on obligations primarily related to costs in connection with discontinued development projects in the Healthcare business sector as well as obligation surpluses from onerous contracts.
A significant proportion of the provisions for acceptance and follow-on obligations are attributable to the results of the two Phase III clinical trials to evaluate the efficacy and safety of evobrutinib. This resulted in the recognition of a provision for follow-on obligations in a high-double-digit million-euro amount in 2023. The outflow of resources is predominantly expected within the next 12 months.
Part of the provision is also attributable to the discontinuation of development projects under the strategic alliance with GlaxoSmithKline, United Kingdom (GSK), and relates to the winding up of clinical trials. On February 5, 2019, the Group entered into a global agreement in the field of immuno-oncology with a subsidiary of GSK to co-develop and co-commercialize the drug candidate bintrafusp alfa. In the third quarter of 2021, it was amicably decided with GSK that the agreement on bintrafusp alfa would end effective September 30, 2021. The provisions recognized in a mid-double-digit million-euro amount included expected expenses for follow-on obligations. The outflow of resources is mainly expected within the next 12 months.
Interest and penalties related to income taxes
Provisions for interest and penalties related to income taxes mainly included penalties arising from tax audits as well as interest payables associated with or resulting from tax payables.
Miscellaneous other provisions
Miscellaneous other provisions included provisions for asset retirement obligations, other tax risks not constituting income tax in accordance with IAS 12, risks in connection with employee participation programs and warranty obligations.