Annual report 2004 (English) - PDF 3546K - Imperial Tobacco

h) Inventories
Inventories of raw materials and merchandise are
valued at the lower of cost or market. Cost is
determined using the weighted average cost
method.
Semifinished and finished goods are valued at the
lower of production cost or market. Production cost
consists of the cost of raw materials and other
consumables plus the remaining manufacturing
costs directly allocable to the product and any
indirect costs allocable to it.
The Altadis Group records allowances to recognize
the decline in value of obsolete or slow-moving
inventories and to adjust the value of inventories
whose cost exceeds their market value or net
realizable value.
i) Classification of receivables and payables
In the accompanying consolidated balance sheet,
receivables and payables maturing in 12 months or
less from year-end are classified as current assets
and current liabilities, respectively, and those
maturing at over 12 months as long-term items.
j) Foreign currency transactions
Transactions in foreign currencies are recorded at
their equivalent value in euros calculated at the
exchange rates ruling at the transaction date.
Exchange gains or losses arising on the settlement
of foreign currency transaction balances are
recognized in consolidated income when they arise.
Unhedged foreign currency balances receivable and
payable at year-end are translated to euros at the
exchange rates then prevailing. The unrealized net
exchange losses in each group of foreign currencies
of similar maturity and market performance are
recognized as expenses and the unrealized net
gains, similarly determined, are deferred to
Altadis Group 2004 Financial Information 95
maturity. The balances hedged by forward exchange
or futures transactions are translated to euros at
the hedged exchange rate.
The exchange differences resulting from the
specific financing transactions for investments in
foreign companies which hedge the exchange rate
risk on these investments are included under the
“Translation Differences” caption in the
accompanying consolidated balance sheet.
k) Severance costs
Under current labor legislation and as stipulated in
certain labor contracts, the Group companies are
required to make severance payments to employees
terminated under certain conditions.
When a restructuring plan is approved by the
directors, made public and notified to the
employees, the Group records the appropriate
provisions to meet future payments arising from
implementation of the plan, based on the best
estimates available of the projected costs per the
related actuarial studies (see Note 15).
l) Corporate income tax
The expense for corporate income tax of the year is
calculated on the basis of book income before
taxes, increased or decreased, as appropriate, by
the permanent differences from taxable income, net
of tax relief and tax credits. The Parent Company
files consolidated tax returns with all the
companies in which it had a direct holding of over
75% as of January 1, 2004, and which are
domiciled in Spain for tax purposes.
The tax assets arising from tax losses and the
prepaid taxes arising from timing differences are
only capitalized if there are no doubts as to their
recovery and if they will be recovered within a
maximum of ten years.