Pallet-Management-Services - AFM

| ANNUAL REPORT 2006 | IFCO SYSTEMS N.V. |
Investment in Equity entities
Entities for which the Company has between 20.0% and
50.0% of voting rights and exercises significant influence
are accounted for using the equity method. Entities for which
the Company has greater than 50.0% of voting rights or are
controlled by the Company are included within Company’s
consolidated financial statements.
The Company owns 33.3% of a Japanese RPC systems
operation (IFCO-Japan) and owns 49.0% of an Argentine RPC
systems operation (IFCO-Argentina). The business processes
of these operations are generally similar to the Company’s other
RPC-Management-Services businesses.
The Company uses the equity method to account for its
investment in IFCO-Japan and IFCO-Argentina and accordingly
has recorded its proportionate share of the operating results
of these businesses, which are included in income from equity
entities in the accompanying consolidated income statements.
The Company is not required to fund operations of IFCO-Japan
or IFCO-Argentina beyond its respective cumulative investments.
Accounts receivables
Trade receivables are recorded at amortized costs or the amount
the Company expects to collect on gross customer trade
receivables. A reserve has been established based on historical
experience, in addition to a reserve for specific receivables
which may not be fully collectible. Items deemed uncollectible
are written off against allowance for doubtful accounts.
Inventories
Inventories are valued at the lower of cost or net realizable value,
with cost primarily determined on a weighted average basis. The
cost of finished goods inventory includes direct materials, direct
labor and overhead.
Investments and other fi nancial assets and liabilities
Financial assets within the scope of IAS 39 are classified as
either financial assets at fair value through profit or loss, loans
and receivables, held to maturity investments, and available
for sale investments, as appropriate. When financial assets
are recognized initially, they are measured at fair value, plus, in
the case of investments not at fair value through profit or loss,
directly attributable transaction cost. The Company considers
whether a contract contains an embedded derivative when the
entity first becomes a party to it. The embedded derivatives are
separated from the host contract which is not measured at fair
value through profit and loss when the analysis shows that the
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economic characteristics and risk of embedded derivatives are
not closely related to those of the host contract.
The Company determines the classification of its financial assets
after initial recognition and, where allowed and appropriate,
re-evaluates the designation at each financial year end.
All regular way purchases and sales of financial assets are
recognized on the trade date, which is the date the Company
commits to purchase the asset. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of
assets within the period generally established by regulation or
convention in the market place.
Initial recognition and measurement
Financial assets consist with the exception of derivatives only of
loans and receivables. Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are
not quoted in an active market. After initial measurement loans
and receivables are subsequently carried at amortized cost using
the effective interest method less any allowance for impairment.
Gains and losses are recognized in income when the loans and
receivables are derecognized or impaired, as well as through the
amortization process.
Financial liabilities are initially recognized at the fair value
of the consideration received less directly attributable costs.
After initial recognition, they are subsequently measured at
amortized cost using the effective interest method. Gains and
losses are recognized in net profit or loss when the liabilities are
derecognized as well as through the amortization process.
Derecognition
Financial assets
A financial asset (or, where applicable a part of a financial asset
or part of a group of similar financial assets) is derecognized
where:
the rights to receive cash fl ows from the asset have expired;
the Company retains the right to receive cash fl ows from
the asset, but has assumed an obligation to pay them in full
without material delay to a third party under a ‘pass-through’
arrangement; or
the Company has transferred its rights to receive cash fl ows
from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.