page 128 Bombardier Inc. Annual Report 2003-04 NOTE 24. COMMITMENTS AND CONTINGENCIES (CONT ’ D) b) Trade-in options In connection with the sale of new aircraft, the Corporation provides, from time to time, trade-in options to customers. These options allow customers to trade in their pre-owned aircraft at a predetermined amount and during a predetermined period, conditional upon purchase of a new aircraft. As at January 31, 2004, the Corporation’s commitment to purchase pre-owned aircraft was as follows: The Corporation reviews its trade-in aircraft purchase commitments relative to the aircraft’s anticipated fair value and records anticipated losses as a charge to income. Fair value is determined using both internal and external aircraft valuations, including information developed from the sale of similar aircraft in the secondary market. As at January 31, 2004, the Corporation recorded $32 million ($30 million as at January 31, 2003) of provisions relating to anticipated losses on trade-in options, based on the likelihood that these options will be exercised. In addition, the Corporation recorded a provision of $28 million as at January 31, 2004 ($91 million as at January 31, 2003) related to trade-in commitments in connection with firm orders of new aircraft. Under the North American Bombardier Flexjet fractional ownership program, customers purchase fractional shares of a Bombardier business aircraft. The Corporation provides customers with an option to sell back their portion of the aircraft at estimated fair value if the option is exercised within a period of five years from the date of purchase. As at January 31, 2004, the Corporation’s commitment to repurchase fractional shares of aircraft based on estimated current fair values totalled $669 million ($985 million as at January 31, 2003). In addition, certain customers can trade in their fractional shares of aircraft at predetermined amounts for a fractional share of a larger model at predetermined amounts. The total commitment to repurchase fractional shares of aircraft, in exchange for a fractional share of a larger model, was $107 million as at January 31, 2004 ($152 million as at January 31, 2003). The Corporation recorded a $30-million provision as at January 31, 2004 ($32 million as at January 31, 2003) for anticipated losses based on the likelihood that these options will be exercised. The Corporation has committed to provide financing in relation to orders on hand which, net of third-party financing already arranged, amounted to $4.6 billion as at January 31, 2004 ($5.2 billion as at January 31, 2003). These commitments are provided under certain terms and conditions, and are related to aircraft on firm order, scheduled for delivery through fiscal year 2010. These commitments have scheduled expiration dates. In connection with the sale of certain transportation rail equipment, Bombardier has provided a credit guarantee of lease payment. This guarantee matures in 2020 and relates to a single customer. In addition, at the expiry date of certain financing and other agreements, the Corporation provides residual value guarantees, mostly in the transportation segment, mainly exercisable in 2014. The Corporation has provided certain financing providers and customers, mainly in the transportation segment, the right, under certain conditions, to sell back equipment to the Corporation at predetermined prices. Of the total amount, $224 million as at January 31, 2004 ($233 million as at January 31, 2003) relates to two agreements whereby the Corporation may be required, beginning in 2008, upon customer default on payments to the financing providers, to repurchase the equipment. In addition, on three separate dates, beginning in 2008, the Corporation may also be required to repurchase the equipment. In connection with this commitment, funds have been deposited in a cash collateral account by the customer, which, together with accumulated interest, is expected to entirely cover the Corporation’s exposure. In certain projects carried out through consortia or other partnership vehicles in the transportation segment, all partners are jointly and severally liable to the customer. In the normal course of business under such joint and several obligations or under performance guarantees that may be issued in relation thereto, each partner is generally liable to the customer for a default by the other partner. These projects normally provide counter indemnities among the partners. These obligations and guarantees typically extend until final product acceptance by the c) Fractional ownership put options d) Financing commitments Other guarantees e) Credit and residual value guarantees f) Repurchase obligations g) Other Less than 1 year $1,656 From 1 to 3 years 378 From 4 to 5 years 303 Thereafter 293 $2,630