ST Engineering Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C11 Provisions Movements in provisions are as follows: Group Warranties Onerous contracts Closure costs Restoration costs Total $’000 $’000 $’000 $’000 $’000 2020 At 1 January 2020 176,146 52,322 1,339 20,646 250,453 Charged to profit or loss 37,490 91,177 – 1,577 130,244 Additions – – – 12,888 12,888 Utilised (31,126) (22,696) (232) – (54,054) Translation difference (769) (2,108) (74) (21) (2,972) At 31 December 2020 181,741 118,695 1,033 35,090 336,559 Provision: Within 1 year 306,758 After 1 year 29,801 336,559 Recognition and measurement Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. (i) Warranties The warranty provision represents the best estimate of the Group’s contractual obligations at the reporting date. Under the terms of the revenue contracts with key customers, the Group is obligated to make good, by repair or replacement, engineering or manufacturing defects that become apparent within the warranty period from the date of sale. The warranty obligation varies from 60 days to 15 years. The Group’s experience of the proportion of its products sold that requires repair or replacement differs from year to year as every contract is customised to the specification of the customers. The estimation of the provision for warranty expenses is based on the Group’s past claim experience over the duration of the warranty period and the industry average in relation to warranty exposures and represents the best estimates of the costs expected to incur per dollar of sales. The warranty provision made as at 31 December 2020 is expected to be incurred over the applicable warranty periods. 19 9 ANNUAL REPORT 2 0 2 0 / CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT