Accounting policy

A contingent liability is:

  1. a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
  2. a present obligation that arises from past events but is not recognized because
    (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
    (ii) the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognized in the consolidated financial statements, except if they arise from a business combination. They are disclosed unless the possibility of an outflow of economic benefits is remote.

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

In € million

 

2018

 

2017

Liabilities and commitments of third parties guaranteed by the Group

 

812

 

706

Environmental contingent liabilities

 

313

 

317

Litigation and other major commitments

 

1

 

1

Total

 

1,126

 

1,024

The liabilities and commitments of third parties guaranteed by the Group mainly concern guarantees relating to:

  • RusVinyl, the joint venture with SIBUR for the operation of a PVC plant in Russia. A guarantee of € 85 million at December 31, 2018 (€ 133 million at the end of 2017) has been provided on a several basis by each sponsor, SolVin/Solvay and Sibur, for the benefit of the lenders and which corresponds for each to 50% of the amount in principal of RusVinyl project finance plus interests and costs;
  • VAT payment (€ 151 million at December 31, 2018, € 195 million at December 31, 2017); and
  • The UK Rhodia Pension Fund, for which the guarantee exceeds the recognized pension liability for an amount of € 210 million – See note F34.B.2. Description of obligations.

Within the framework of the annual review of contingent liabilities, environmental contingent liabilities for a total amount of € 313 million have been identified at December 31, 2018 (€ 317 million at December 31, 2017).