ANNUAL REPORT 2008/09 - Sonova

3.1 Principles of consolidation
Investments in subsidiaries
Investments in subsidiaries are fully consolidated.
These are entities over which Sonova Holding AG
directly or indirectly exercises control. Control is the
power to govern the fi nancial and operating poli -
cies of an entity so as to obtain benefi ts from its ac -
tivities. Control is presumed to exist when the
parent owns, directly or indirectly through subsidiaries,
more than half of the voting power of an entity
unless, in exceptional circumstances, it can be clear -
ly demonstrated that such ownership does not constitute
control. For the consolidated entities, 100%
of assets, liabilities, income and expenses are included.
The interests of minority shareholders in equity
and net income or loss are shown separately
in the balance sheet and income statement. Changes
in minority interests are accounted for using the
“modifi ed parent company model”, with any excess
of purchase consideration over the carrying values
of the attributable net assets acquired being
recorded as goodwill.
Group Companies acquired during the year are
included in the consolidation from the date on which
control over the company is transferred to the
Group, and are excluded from the consolidation as
of the date the Group ceases to have control over
the company. Intercompany balances and transactions
(incl. unrealized profi t on intercompany in -
ventories) are eliminated in full.
Investments in associates
Investments in associates are accounted for
using the equity method of accounting. These are
entities in which Sonova has signifi cant infl uence
and which are neither subsidiaries nor joint
ventures of Sonova. Signifi cant infl uence is the
power to par ticipate in the fi nancial and operating
policy decisions of the acquired company but is
not control or joint control over those policies (usu-
66 CONSOLIDATED FINANCIAL STATEMENTS
ally 20 – 50% of voting rights). Under the equity
method, the investment in an associate is initially
recognized at cost (including goodwill on acquisition)
and the carrying amount is increased or decreased
to recognize Sonova’s share of profi t or
loss of the acquired company after the acquisition
date. In order to apply the equity method the most
recent available fi nancial statements of an associate
are used, however due to practicability reasons
the reporting dates might vary up to three months
from the Group’s reporting date. The net assets
and results from associates are adjusted, if necessary,
to comply with the Group’s accounting policies.
The Group’s share of equity in associated companies,
consolidated using the equity method, is
shown in the balance sheet as “Investments in
associates/joint ventures,” and its share of the re -
sults of operations for the year is shown in the
income statement as “Share of gain/(loss) in asso -
ciates/joint ventures”.
Associates acquired during the year are accounted
for as “Investments in associates/joint ventures”
from the date on which signifi cant infl uence over the
acquired company is transferred to the Group,
and derecognized from that position as of the date
the Group ceases to have signifi cant infl uence
over an associate.
Investments in joint ventures
Investments in joint ventures are accounted for using
the equity method of accounting. Joint ventures
are contractual arrangements whereby two or more
parties undertake an economic activity that is
subject to joint control. Joint control is the contractually
agreed sharing of control over an economic
activity, and exists only when the strategic fi nancial
and operating decisions relating to the activity
require the unanimous consent of the parties sharing
control. Under the equity method, the investment
in a joint venture is initially recognized at cost and