Annual Report 2010 - Knorr-Bremse AG.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 137
Work in process and finished products are stated at production cost, but in no case higher than the
projected sales revenues less any costs accruing prior to sale. Production cost includes direct cost of
materials and labor, as well as production overhead. A reasonable allowance is made where there is a
risk of a decline in inventory values. Receivables are stated at their nominal value, less any necessary
provisions against specific debts. Receivables bearing no or low interest are stated at their net present
value. General charges have been made to cover the general credit risk.
Other assets are stated at the lower of average acquisition cost, net present value or fair value.
Earnings or disbursements prior to the balance sheet date are shown as prepaid income or prepaid
expenses where they represent revenues or expenses for a certain period after the balance sheet date.
Foreign currency items are valued at the rate existing at the transaction date or – if less favorable – at
the rate at the balance sheet date. Where foreign currency items have been hedged, they are valued
at the corresponding hedging rate. In the individual financial statements of companies included in
consolidation, assets and liabilities denominated in foreign currencies are translated at the mean spot
rate at the final balance sheet date. Unrealized currency gains as defined in § 256a clause 2 and § 252
(1) no. 4 of the German Commercial Code (HGB) have no overall significance.
Rate-hedging and option transactions are performed selectively and exclusively for hedging purposes.
Wherever possible, financial derivatives covering assets, borrowings, open contracts or transactions
with a high probability of closure are bundled together as single items for valuation purposes (“macro
hedges”).
Accrued liabilities include reasonable and sufficient allowance for all perceivable risks and any contingent
liabilities. Accruals are valued in accordance with § 253 (1) and (2) of the German Commercial
Code (HGB), whereby use has been made of the options for retention of control laid out in Article 67
(1) clause 2 and (3) clause 1 of the Act Introducing the German Commercial Code (EGHGB). Transfers
to accrued liabilities are made using the net method.
In Germany, pension plan accruals and similar commitments are set up according to actuarial principles
based on realistic assumptions. Assumptions included in the calculations include future salary
increases and future pension adjustments, as defined in § 16 of the German Law on Occupational Pensions
(BetrAVG), as well as assumptions relating to staff turnover. The calculations are based on the
biometric reference values devised by Klaus Heubeck (mortality tables RT 2005 G). The following parameters
were applied: