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timate tax determination is uncertain during the ordinary course of business. Group and company recognises
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the
final tax outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the income tax and deferred tax provisions in the period in which such determination is made.
• Provisions
Doubtful accounts are reported at the amounts likely to be recoverable based on historical experience of cus-
tomer default. As soon as it is learned that a particular account is subject to a risk over and above the normal
credit risk (e.g., low creditworthiness of customer, dispute as to the existence or the amount of the claim, etc.),
the account is analyzed and written down if circumstances indicate the receivable is uncollectible.
Provisions for environmental rehabilitation are reported at the amounts that are likely to be claimed against
the Group in order to settle the liability
• Contingencies
The Group is involved in litigation and claims in the normal course of operations. Management is of the opinion
that any resulting settlements would not materially affect the financial position of the Group as at December
31, 2012. However, the determination of contingent liabilities relating to the litigation and claims is a complex
process that involves judgments as to the outcomes and interpretation of laws and regulations. Changes in the
judgments or interpretations may result in an increase or decrease in the Company’s contingent liabilities in
the future.
Electricity cost, subsidiary Aluminium S.A.
As extensively discussed in Note 6.34 “Contingent assets - liabilities”, the Group’s subsidiary, Aluminum S.A. is
in arbitration with the PPC S.A., in terms of setting the price of electricity. The decision of the competent arbi-
tral tribunal is expected to definitively establish the amount that PPC should and must invoice Aluminium SA,
thus the obligation or claim arising in connection with both the amounts of provisions that have been registered
and payments the subsidiary company has made to PPC S.A. for the period from 1/7/2010 until 31/12/2013.
In this context, until the final decision of the arbitral tribunal, the Management of the subsidiary, aiming the
best assessment of the amount of the liability to PPC S.A. took into account the historical evolution of the case
(see note 6.34) and related decisions RAE: 798/2011 (on the draft agreement between PPC S.A. and Aluminum
S.A.) and 692/2011 (Basic price policy), but mostly took note of the decision 346/2012 RAE in which the latter,
based on what the noted judgments of (798 and 692), established as temporary the price of 42 €/MWh, plus
the extra charges provided for Public Utility Services (PUS) , Renewable Energy Sources (RES) charge, use of
transport system and other taxes. The application of the above temporary price , based on the RAE decision ra-
tionale, will regard the total number of working hours of ALUMULIUM S.A, taking into account the single zone
tariff rates throughout the day, which are dictated by the company consumption profile.
Based on all the above, the management of the Aluminium S.A subsidiary company , taking the afore-men-
tioned price determined by the independent competent authority (RAE) in its 346/2012 decision as a measure
of optimum calculation, re-calculated accordingly its liabilities towards DEI for the period spanning 1/7/2010
to 31/12/2012.
From this re-calculation there occurred a reduction of its overall liabilities to PPC S.A. by € 22 million, which
can be analysed as follows:
• € 9, 87 million for the period of 6/2010- 12/ 2010
• € 12, 1 million for the year of 2011
