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Accounting policy
A provision for a liability is made when a legal or constructive obligation exists, payment is probable (more
likely than not), and the liability is possible to estimate. If any of the recognition criteria are not met, the liability
is considered a contingent liability and no provision shall be recorded, but instead described in Note 3.8.
Estimate and judgement
Product liability claims consist of various warranty claims arising from products sold. By nature, the related
amounts and timing of any outflows are difficult to predict. Assumptions used to calculate provisions for
product liability claims are based on technical assessments of product failures and the related expected repair
costs for each specific case. It is expected that most of these costs will be payable in the next three years, and all
will have been payable within five years after the reporting date.
The Group has recorded provisions for environmental liabilities at some currently or formerly owned, leased
and third-party sites throughout the world. Pre-studies and analysis of relevant areas have been undertaken to
reliably estimate the provisions that have been recognised.
3.8 CONTINGENT LIABILITIES
Product liability claims and disputes
Jotun Group is, through its ongoing business, involved in product liability claims cases and disputes in
connection with the Group’s operational activities. Provisions have been made to cover the expected outcome
of disputes insofar as negative outcomes are likely and reliable estimates can be made. In evaluating the size
of the provisions, expected insurance cover is considered separately. Jotun acknowledges the uncertainty of
the disputes, but believes that these cases will be resolved without significant impact on the Group’s financial
position.
Environmental matters
The Group is through its operations exposed to environmental and pollution risk. Production facilities and
product storage sites have been inspected with respect to environmental conditions in the soil. For clean-up
projects where implementation is probable and reliable cost estimates exist, provisions are made accordingly.
Due to uncertainties inherent in the estimation process, it is possible that such estimates could be subject to
change. In addition, further expenditures may arise as conditions at various sites have yet to be determined.
The amount of such future costs is not determinable due to the unknown timing and extent of corrective
actions which may be required.
All of Jotun’s activities are carried out in accordance with local laws and regulations, and Jotun’s Health,
Safety and Environment (HSE) requirements. These laws and regulations are subject to changes, and such
changes may require that the company make investments and/or incurs costs to meet more stringent emission
standards or to take remedial actions related to e.g., soil contamination.
Accounting policy
As stated in Note 3.7, contingent liabilities are potential liabilities that do not meet the recognition criteria
for provisions and are hence not recorded in the balance sheet. IFRS accounting standards, however, require
disclosure of such information in the notes.
3.9 CONTRACTUAL OBLIGATIONS AND GUARANTEES
Purchase obligations
The Group’s contractual purchase obligations are mainly related to investments in new plants and buildings.
There is a substantial investment programme ongoing in the Group. Out of the total ongoing investment
programme, NOK 568 million is contractually committed capital expenditure (CAPEX) at year-end. These
contractual commitments mainly relate to projects in Egypt, Dubai and Vietnam. For purchase of raw materials
there are no actual commitments for the Group. In general, these contracts can be terminated without
significant penalties.
Other obligations
Jotun A/S has guarantees covering tax withholding and other guarantees for its subsidiaries. These amounted
to approximately NOK 403 million in 2021 (2020: NOK 398 million).
A subsidiary in China, Jotun Coatings (Zhangjiagang) Co. Ltd., has used bank drafts to pay some of its suppliers.
The issuing bank(s) is obligated to make unconditional payment to the supplier (or bearer) on a designated
date. If unforeseen events occur and the issuing bank(s) is not able to meet its obligation, then Jotun would
still hold the final obligation towards its suppliers. Unsettled bank drafts totalling NOK 651 million
(2020: NOK 404 million) have been used as payment as of 31 December 2021.
Jotun Group
32 I Jotun Annual Report 2021