3.5 Provisions

Accounting policies

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Insurance claims

Provisions for insurance claims relate to potential motor insurance claims and potential public liability claims where accidents have occurred but a claim has yet to be made. The provision is made based on estimates provided to Ocado by the third-party manager of the Ocado Cell in Atlas Insurance PCC Limited (the "Ocado Cell").

Dilapidations

Provisions for dilapidations are recognised on a lease by lease basis and are based on the Group's best estimate of the likely committed cash outflow.

3.5.1 Provisions


Insurance claims
£'000
Dilapidations
£'000
Total
£'000
As at 29 November 2009 366 366
Charged/(credited) to the income statement


— additional provision 115 203 318
— unused amounts reversed (1) (1)
Used during the period (122) (122)
As at 28 November 2010 115 446 561
Charged/(credited) to the income statement


— additional provision 506 320 826
— unused amounts reversed
Used during the period (27) (119) (146)
As at 27 November 2011 594 647 1,241

Analysis of total provisions as at 28 November 2010


Insurance claims
£'000
Dilapidations
£'000
Total
£'000
Current 115 115
Non-current 446 446

115 446 561

Analysis of total provisions as at 27 November 2011


Insurance claims
£'000
Dilapidations
£'000
Total
£'000
Current 594 92 686
Non-current 555 555

594 647 1,241

Insurance claims

The Ocado Cell uses statistical information built up over several years to estimate, as accurately as possible, the future outturn of the total claims value incurred but not reported as at the balance sheet date. In practice the Ocado Cell receives newly reported claims after the end of the underwriting period that have to be allocated to the year of loss (i.e. the underwriting year of occurrence). The calculation of this provision involves estimating a number of variables, principally the level of claims which may be received and the level of any compensation which may be payable. Uncertainty associated with these factors may result in the ultimate liability being different from the reported provision. Although it is expected that most claims will be settled within 12 months of the balance sheet date, the exact timing of utilisation of the provision is uncertain.

Dilapidations

The dilapidations provision is based on the future expected repair costs required to restore the Group's leased buildings and vans to their fair condition at the end of their respective lease terms.

The CFC1 lease expires in 2032, with leases for the spokes expiring between 2014 and 2021. Contractual amounts are due to be incurred at the end of the respective lease terms.

Leases for vans run for five years, with the contractual amount per van due at the end of the five year lease term. If a non-contractual option to extend individual leases for a further six months is exercised by the Group, the contractual obligation remains the same but is deferred by six months.