Notes to the Consolidated Financial Statement

 

21. Provisions

Changes in provisions during 2011:

€ 000

Restructuring provision

Unprofitable agreements

Total

1.1.2011

0

133

133

Increase in provisions

4,874

365

5,239

Provisions used

-2,907

-116

-3,023

Reversals of unused provisions

-

-

-

31.12.2011

1,967

382

2,349


Changes in provisions during 2010:

€ 000

Restructuring provision

Unprofitable agreements

Total

1.1.2010

895

157

1,052

Increase in provisions

-

79

79

Provisions used

-895

-103

-998

Reversals of unused provisions

-

-

-

31.12.2010

0

133

133

 

Restructuring provision

The restructuring provisions are related to personnel negotiations conducted during the financial year.

Realigned technology-platform strategies and changes in the competitive situation for phone manufacturers markedly changed the business environment for the company’s Mobile Solutions segment. As a result of the changes and the ensuing reduction in contract engineering orders, the Mobile Solutions segment’s consolidated net sales and profitability fell significantly throughout the financial year. This had a major negative impact on the whole company’s consolidated net sales and operating profit compared to the previous year. For this reason, the company conducted four rounds of personnel negotiations during the period, leading to the closure of the Pori and Lappeenranta offices and the dismissal of 344 employees.

Unprofitable agreements

A loss provision is created for fixed-price projects if it becomes apparent that the completion of the project will require significantly more work input than has been estimated in connection with selling the project and can be invoiced from the customer on the basis of the agreement.

On the balance sheet date of 31 December 2011, there were six fixed-price projects for which loss provisions had been recorded on the basis of remaining work.