Panalpina Annual Report 2006

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Consolidated and Annual Financial Statements 2006 Normally, the Group consciously decides not to designate derivative instruments for hedge accounting according to IAS 39 (although they all are hedging-instruments from an economic point of view). Otherwise, the Group can designate individual derivatives as either: • a hedge of the exposure to changes in the fair value of a recognized asset or liability (fair value hedge), • a hedge of the exposure to variability in cash flows associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedges) or • a hedge of net investments in a foreign operation. For qualifying cash flow hedges, the derivative hedging instrument is recorded at fair value. The portion of any change in fair value that is an effective hedge is included in equity, and any remaining ineffective portion is reported in income (expense). If a hedged forecast transaction results in the recognition of a non-financial asset or liability, the cumulative change in fair value of the hedging instrument that has been recorded in equity is included in the initial carrying value of that asset or liability at the time it is recognized. For all other qualifying cash flow hedges, the cumulative changes in fair value of the hedging instrument that have been recorded in equity are included in income (expense) at the time when the forecasted transaction affects net income. For qualifying hedges of net investments in foreign operations, the hedging instruments are accounted in a manner similar to cash flow hedges. The foreign exchange portion of any change in fair value that is an effective hedge is included in equity as translation reserve. Any remaining ineffective portion is recorded in income (expense). If the hedged subsidiary is disposed of, then the cumulative amounts that have been recorded in equity are included in income (expense) at the time of the disposal. 4 Critical accounting estimates and judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below. Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in the note Intangible assets, section Goodwill. The recoverable amounts of cash-generating units (CGU) have been determined based on value-in-use calculations. These calculations require the use of estimates. A sensitivity analysis shows that a reduction of free cash flow of the tested CGU of up to 10% at most would not result in an impairment of goodwill. Claim provisions A number of subsidiaries are subject to litigation arising out of the normal conduct of their businesses, as a result of which claims could be raised against them. The Group used for the above mentioned provision the conservative actuarial calculation, which requires for the calculation of the “incurred but not reported reserves (IBNR)”, among other estimations, the overall circumstances which may impact the future losses, such as the growth of business. If the management decided to use the optimum actuarial calculation method, which takes only into consideration the linear loss development according to historical figures, the carrying amount of claim provision would be approximately CHF 2.7 million lower. If the used actuarial calculation would differ by 10% from the management’s estimates, the carrying amount of claim provision would be approximately CHF 1.8 million higher. Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgments are required in determining the current and deferred assets and liabilities for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are reasonable and that the recognized liabilities for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on the income tax assets. These factors include, but are not limited to, changes in tax laws regulations and / or rates, changing interpretation of existing tax laws or regulations and changes on management estimations. Such changes that arise could affect the assets and liabilities recognized in the balance sheet in future periods. Panalpina Annual Report 2006 87
Consolidated and Annual Financial Statements 2006 5 88 Panalpina Annual Report 2006 Segmental reporting Reporting by geographical segments Europe / Africa / Central and South Middle East / CIS North America America in million CHF 2006 2005 2006 2005 2006 2005 External forwarding services 4,418 3,929 1,699 1,536 670 662 Intra-group forwarding services 2,585 2,407 492 455 184 130 Net forwarding revenue 7,003 6,336 2,191 1,991 854 792 Forwarding services from third parties (6,087) (5,535) (1,884) (1,718) (717) (672) Segment contribution margin (gross profit) 916 801 307 273 137 120 Other segment expenses (753) (719) (296) (270) (118) (109) Segment operating result (Ebit) 163 82 11 3 19 11 Financial result Earnings before taxes Taxes on income Consolidated net earnings Europe / Africa / Central and South Middle East / CIS North America America in million CHF 2006 2005 2006 2005 2006 2005 Additional information Segment assets 1,328 1,084 322 339 140 123 Segment liabilities 702 602 152 144 48 40 Capital expenditure 35 37 9 (10) 5 3 Depreciation of property, plant and equipment 22 24 6 6 2 2 Amortization of intangible assets 10 8 1 1 1 1 Impairment of financial assets 0 0 0 0 0 0 The Group organizes its business primarily by regions. Segment information is prepared on the basis of the location of the assets. Usually, the location of the customers does not differ from the location of the assets in the particular region. Intersegmental services are charged at market rates. Segment expenses are shown after elimination of intra-group transactions. Reporting by business segments Air freight Ocean freight Supply Chain Management in million CHF 2006 2005 2006 2005 2006 2005 Net forwarding revenue 3,713 3,408 2,826 2,399 1,196 1,142 Forwarding services from third parties (3,026) (2,772) (2,334) (1,996) (784) (773) Segment contribution margin 687 636 492 403 412 369 Total assets 838 788 510 536 210 262 Capital expenditure 20 13 11 11 8 17 The Group’s business can be divided into three divisions: Air Freight, Ocean Freight and Supply Chain Management. The assets allocated to the divisions mainly comprise trade receivables, work in progress, accruals, tangible fixed assets and intangible assets. Cash, financial investments and assets related to the central management functions are not allocated.
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Panalpina Annual Report 2006 A Pass
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A world-class provider of forwardin
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Interview with Gerhard Fischer 6 Pa
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Executive Board Sandro Knecht Regio
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Report of the Executive Board 14 Pa
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“Demand soaring on a global scale
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Reporting Regions European Regional
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Reporting Regions Noram Regional Co
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Reporting Regions Apac Regional Com
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Marketplace India Soon to be the wo
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Marketplace India 4 Panalpina Annua
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