Financial Report and Registration Document 2010 - Groupe Seb

3 NOTES
CONSOLIDATED FINANCIAL STATEMENTS
TO THE CONSOLIDATED FINANCIAL STATEMENTS
amendment to IFRIC 14 – Prepayments of a Minimum Funding
Requirement. The amendment specifies that any prepayments of a
minimum funding requirement under defined benefit plans must be
recognised as an asset in the same way as any other prepayment;
IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments.
This interpretation provides guidance on accounting for agreements
to settle a fi nancial liability fully or partially with shares or other equity
instruments.
1.1. BASIS AND SCOPE OF CONSOLIDATION
Material companies that are exclusively controlled by SEB S.A. either directly
or indirectly are fully consolidated.
The profi ts of subsidiaries acquired or disposed of during the year are
recognised in the consolidated income statement from the acquisition date
or up to the disposal date.
Where necessary, the financial statements of subsidiaries are restated to
comply with Group accounting policies.
Material companies over which SEB S.A. exercises signifi cant infl uence,
directly or indirectly, are accounted for by the equity method. At 31 December
2010, no entities were accounted for by the equity method.
Certain companies fulfilling the above criteria are not consolidated because
they are not material in relation to the Group as a whole. The materiality
criteria applied by the Group are as follows:
revenue of at least €10 million;
total assets of at least €10 million;
total debt of at least €5 million.
The list of consolidated companies is presented in Note 32.
All material intra-group transactions have been eliminated in consolidation.
1.2. FOREIGN CURRENCY TRANSLATION
1.2.1. Translation of the financial statements
of foreign operations
The financial statements of foreign entities are prepared in their functional
currency, corresponding to the currency of the primary economic environment
in which the entity operates. The functional currency of most foreign entities
is their local currency.
The euro is the Group’s functional currency and reporting currency.
The financial statements of foreign entities are translated into euros by the
closing rate method, as follows:
assets and liabilities in a functional currency other than the euro are
translated at the closing rate at the balance sheet date and income
statement items are translated at the weighted average rate for the year;
the resulting exchange differences are recognised as a separate
component of equity, under “Translation reserve”.
The financial statements of subsidiaries whose functional currency is not the
local accounting currency are initially translated into the functional currency
using the historical rate method, as follows:
non-monetary assets and liabilities (non-current assets, inventories and
securities) and the corresponding movements recorded in the income
statement are translated at the historical exchange rate;
monetary assets and liabilities (cash, short and long-term loans and
borrowings, operating receivables and payables) are translated at the
closing rate at the balance sheet date;
income statement items are translated at the weighted average rate for
the year, apart from depreciation, amortisation and impairment losses on
non-monetary items;
the resulting exchange differences are recognised in the income statement.
These financial statements in the functional currency are then translated into
euros using the closing rate method.
In accordance with the option available to first-time adopters under IFRS 1,
Groupe SEB elected to reset to zero at 1 January 2004 the cumulative
translation differences arising on consolidation of foreign entities.
1.2.2. Translation of foreign currency transactions
Foreign currency transactions are recognised and measured in accordance
with IAS 21 – The Effects of Changes in Foreign Exchange Rates.
Transactions in currencies other than the euro are initially recognised at
the exchange rate prevailing on the transaction date. Monetary assets and
liabilities denominated in currencies other than the euro are translated at the
closing exchange rate, and the resulting exchange differences are recognised
in the income statement.
The effect of changes in exchange rates on the fair value of non-monetary
fi nancial assets and liabilities is recognised by the accounting method
applied to the category of financial assets or liabilities concerned.
Monetary fi nancial assets are measured at amortised cost in the original
currency and changes in amortised cost corresponding to exchange
differences are recognised in the income statement, while other changes
are recognised directly in equity.
The Group’s exposure to certain currency risks is hedged using forward
contracts and options (see Note 1.4.4 c) Derivative Instruments).
1.3. USE OF ESTIMATES
The preparation of consolidated fi nancial statements in accordance with
IFRS requires the use of estimates and assumptions that have an impact
on the reported amounts of assets and liabilities – such as accumulated
depreciation, amortisation and impairment losses – and contingent assets
and liabilities at the balance sheet date and income and expenses for the
year.
All such estimates are made on a going concern basis using the information
available when the financial statements are drawn up. They reflect amounts
and assumptions that management considers relevant and reasonable given
the Group’s operating environment and past experience. In the current
economic environment, short and medium-term forecasting has become
more diffi cult. The estimates and assumptions used to prepare the 2010
consolidated financial statements reflected the financial parameters shaping
the market at 31 December. The value of certain assets, such as goodwill
and trademarks, was estimated at the year-end based on the long-term
economic outlook and management’s best estimates, taking into account
the reduced visibility of future cash flows.
68 FINANCIAL REPORT AND REGISTRATION DOCUMENT 2010 GROUPE SEB