Annual Report 2007 - Muehlhan AG

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Financial assets held for sale
at the time of acquisition, financial assets are recorded at their acquisition costs (market value) plus related
transaction costs. Subsequent valuation is at fair value (market value). Subsequent changes in value are recorded
in equity (revaluation reserve) in a net effecting operating results manner after taking deferred taxes into account until
the asset is sold or an impairment is recorded with an effect on net income. financial assets held for sale are
shown as financial investments.
Impairment of assets
assets with an indeterminate useful life are not regularly depreciated or amortized. they are subject to an annual impairment
test. tangible fixed assets and intangible assets with a defined useful life are also subject to an impairment test if
there is an indication that the value of the respective asset is reduced. in this connection, the realizable amount (the higher
of net realizable value and service value) is determined and compared with the asset’s carrying amount. if the realizable
value is lower than the carrying amount, the balance is taken to expense. if the reason for the write-down has ceased to
exist in the meantime, a write-up is recorded up to the amortized costs. No such write-up is made with respect to goodwill.
the impairment test is made on the basis of the discounted cash flow method. the expected cash flow is based on
business planning data. its present value is calculated by reference to an interest rate brought about by market forces.
Pension accruals and similar obligations
there are contributory pension plans which do not entail any additional pension obligation except for the current payment
of contributions. there are also defined benefit pension plans at two companies which relate almost entirely to pension
obligations to a retired former managing director of a subsidiary. the pension accruals with respect to the defined
benefit pension plans are calculated in accordance with the projected unit credit method. this actuarial determination of
the present value of accumulated plan benefits does not only take into account the current pension payments and
vested rights of future pension payments at the balance sheet date but also the expected future increase in salaries
and pensions. the 10% corridor method pursuant to iaS 19.92 is applied with respect to actuarial gains or losses. the
accrual is reduced by the amount of potential plan assets. Service and interest costs are shown under personnel
expenses. the actuarial present value of the defined benefit obligation is calculated by discounting the expected
future payments at an interest rate attributable to top-rated corporate bonds denominated in the currency in which
payments have to be made and at maturities matching the pension obligations. in respect of contributory pension plans,
the payments of contributions are shown under personnel expenses. Contributions outstanding at the balance sheet
date are recorded under pension accruals.
Other provisions
in accordance with iaS 37, other provisions are accounted for all risks discernible at the balance sheet date and third-party
liabilities resulting from past transactions or events if the amounts and maturities involved are uncertain. provisions are
based on the best estimate of the amount of the settlement. positive performance contributions are not netted. provisions
are also set up with respect to onerous contracts. a contract is deemed to be onerous if the unavoidable costs exceed
the economic benefit expected from the contract.
Financial liabilities
in principle, financial liabilities are stated at their attributable present value less transaction expenses and carried forward
at amortized cost. Non-interest-bearing or low-interest liabilities with a term of at least one year are accounted for at their
present value taking into account a market-oriented interest rate. liabilities originating from finance leases are accounted
for at the present value of the minimum lease payments at the beginning of the lease transaction or the fair value, if lower,
and reduced by the redemption payments included in the lease rentals.
in principle, short-term financial liabilities include the portion of long-term loans with a term up to one year.