Annual Report 2010 - Knorr-Bremse AG.

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Associated companies are consolidated using the equity method, with goodwill generally included as
part of the cost of acquiring interests in associated and related companies. Associated companies acquired
prior to January 1, 2010 were consolidated at the date of acquisition or the balance sheet date.
As from year-end 2010, companies are included in consolidation at the date of acquisition.
Our share in the annual results of companies consolidated in accordance with this method, including
amortization on goodwill, is shown in the statement of income under Financial results. Receivables
and liabilities are offset between consolidated companies. Unrealized intercompany profits resulting
from intercompany trade in goods and services are eliminated in the consolidated statements. In the
consolidated statement of income, revenues from intercompany sales and other intercompany income
are offset against the corresponding expenses.
Foreign currency translation
The individual financial statements of the foreign companies included in consolidation are translated
into euros at the mean spot rate at the balance sheet date, with the exception of shareholders’ equity,
which is translated into euros at the historic rate. Income statement items are translated into euros at
the mean rate. Any resulting translation difference is shown in Group equity as the equity difference
arising on currency translation.