Operating Assets, Liabilities, and Contingent Liabilities

(27) Other provisions

Other provisions developed as follows:

Other provisions

€ million

 

Litigation

 

Restructuring

 

Environmental protection

 

Acceptance and follow-on obligations

 

Interest and penalties related to income tax

 

Other

 

Total

Jan. 1, 2024

 

59

 

210

 

149

 

181

 

127

 

127

 

852

Additions

 

40

 

123

 

16

 

104

 

26

 

62

 

371

Utilizations

 

-26

 

-121

 

-5

 

-102

 

-7

 

-17

 

-279

Release

 

-8

 

-63

 

-4

 

-24

 

-53

 

-30

 

-181

Interest effect

 

 

1

 

2

 

 

 

 

4

Currency translation

 

-1

 

1

 

 

 

1

 

1

 

3

Changes in scope of consolidation/Other

 

 

-4

 

 

4

 

 

-6

 

-6

Reclassification to liabilities directly related to assets held for sale

 

 

-1

 

 

 

 

-1

 

-2

Dec. 31, 2024

 

65

 

147

 

158

 

162

 

94

 

136

 

761

thereof: current

 

54

 

106

 

21

 

138

 

94

 

92

 

505

thereof: non-current

 

11

 

40

 

137

 

25

 

 

44

 

257

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 in question.

The following factors are also relevant in measuring provisions for litigation:

  • the duration of proceedings in pending legal disputes and the associated legal costs,
  • 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 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. Provisions for interest and penalties related to income taxes are generally classified as current provisions because the responsible authority can be expected to issue an assessment notice at any time.

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 relate 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 assessment of the extent of necessary remediation measures and 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 relate to the interpretation of tax codes and the effects of amended case law.

Litigation

The largest individual item within the provisions for litigation was a low-double-digit million-euro amount for the provision for expected legal costs in connection with the legal dispute with Merck & Co., Inc., Rahway, NJ, United States (outside the United States and Canada: MSD) in the United States. Further information can be found in Note (28) “Contingent liabilities”.

Restructuring

The restructuring provisions recognized as of December 31, 2024, primarily related to obligations for workforce reduction measures in connection with communicated restructuring plans.

They also included provisions for the program that was launched in fiscal 2023 to continuously improve processes and align the Group functions more closely with the businesses. Reversals in a low-double-digit million-euro amount related to this program.

The restructuring provisions also included programs to improve efficiency and increase customer focus in the three business sectors.

These provisions 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.

Most of the provisions are expected to be utilized after more than one year.

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 substantial part of the provisions for acceptance and follow-on obligations was attributable to the termination of the xevinapant program (see Note (7) “Collaboration and licensing agreements”). A corresponding provision for follow-on obligations was recognized in a high-double-digit million-euro amount. Following partial utilization, this provision still amounted to a mid-double-digit million-euro figure at the end of fiscal 2024. The outflow of resources is mainly expected within the next 12 months.

The utilization was mainly due to last year’s termination of phase III clinical trials of evobrutinib.

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.

The reversal primarily related to interest and financial penalties in connection with a tax audit in Mexico for which an agreement was reached with the responsible authorities in fiscal 2024.

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.

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