Panalpina Annual Report 2006

Consolidated and Annual Financial Statements 2006
78 Panalpina Annual Report 2006
Foreign currencies translation
Functional and presentation currency
The consolidated financial statements of Panalpina Group are presented in Swiss francs (CHF). The financial statements
of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity
operates (functional currency), which is generally the local currency.
Foreign currency transactions
Each entity in the Group determines its own functional currency and items included in the financial statements of each
entity are measured using this functional currency. Transactions in foreign currencies are initially translated into the functional
currency using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the balance sheet date using the period-end exchange rate. All differences are taken
to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net
investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they
are recognized in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are
also dealt with in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates as of the dates of the initial transaction. Any goodwill arising on the acquisition are treated as
assets and liabilities of the foreign operation and translated at the closing rate.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analyzed
between translation differences resulting from changes in the amortized cost of the security and other changes in the
carrying amount of the security. Translation differences related to changes in the amortized cost are recognized in profit or
loss, and others in the carrying amounts are recognized in equity.
Translation of Group companies
The results and financial positions of all Group entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.
• Income and expenses for each income statement are translated at average exchange rates.
• All resulting exchange differences are recognized as a separate component of equity.
The most important exchange rates used in the reported financial statements are:
Revenue recognition
Balance
Sheet
2006 2005
Income
Statement
Balance
Sheet
Income
Statement
EUR 1.60762 1.57776 EUR 1.55665 1.55095
USD 1.22030 1.24152 USD 1.31230 1.24631
GBP 2.39887 2.31830 GBP 2.26542 2.26783
Net forwarding revenue includes services for forwarding performed to third parties after deducting trade discounts and
volume rebates and excluding sales taxes and value added taxes less charges for customs, duty and taxes. Trade discounts
and volume rebates are recorded on an accrual basis consistent with recognition of the related revenue recorded as a
deduction for accounts receivables or as accrued liabilities or provisions. Such estimates are based on analyses of existing
contractual or legislatively-mandated obligation, historical trends and the Group’s experience.
Net forwarding revenue is recognized at the time the services are performed. Logistics projects and other services with a
longer period of delivery are recognized in the accounting period in which the service is rendered, by reference to completion
of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be
provided.
Forwarding services from third parties includes the corresponding direct production costs excluding the related production
overheads for services rendered.
Contribution margin (gross profit) includes net forwarding revenue from services rendered less related expenses for services
provided by third parties net of customs, duty and taxes.
Other revenues, e.g. dividends, interest, licenses, etc., are accrued as they arise. For the financial statements, they are
recorded in the appropriate period, to the extent that a legal right to receive the payment has been established.