Annual Report 2003 2004

accumulated other comprehensive income into earnings occurs
in the same period as the underlying transaction affects earnings.
The fair value changes that are due to time value changes when
measuring the effectiveness between the underlying hedged
transaction and the hedging instrument are considered the ineffective
portion of the hedge and are recognized in earnings immediately.
The fair value changes of interest rate derivatives designated to
hedge long-term liabilities subject to interest rate fluctuations are
also recognized in accumulated other comprehensive income if
they meet the requirements to apply cash flow hedge accounting.
These amounts in other comprehensive income will be offset
against related asset or liability accounts in the future as fair values
fluctuate. When the cash flow hedging model is applied, changes
in market rates will not impact future interest expense positions.
Disposal Groups and Discontinued Operations
The Group reports as a disposal group long-lived assets that will be
disposed of by sale together with other assets and liabilities in a
single transaction, which collectively meet the held for sale criteria of
sfas 144 “Accounting for the Impairment or Disposal of Long-Lived
Assets”. The Group reports the assets and liabilities of a disposal
group separately in the balance sheet line items “assets held for
sale” and “liabilities associated with assets held for sale”,
respectively. Unless a disposal group qualifies for discontinued
operations reporting, the revenues and expenses of the disposal
group remain within continuing operations until the date of disposal.
The Group reports the results of a disposal group that also qualifies
as a component of the Group as discontinued operations if its cash
flows can be clearly distinguished operationally and for financial
reporting purposes from the rest of the Group and the Group does
not have significant continuing involvement with the component
subsequent to its disposal. The Group reports the results of
discontinued operations in the period in which they occur separately
within the consolidated statement of income as “discontinued
operations (net of tax)”. All prior period consolidated statements of
income are adjusted to report the results of the component within
discontinued operations.
137
Financial Report
Consolidated financial statements
Financial statement classification
Certain line items in the consolidated statement of income and on
the consolidated balance sheet have been combined. These items
are disclosed separately in the Notes to the consolidated financial
statements. Certain reclassifications have been made to the prior
years presentations to conform to that of the current year.
The consolidated statements of income and the consolidated
balance sheets are presented in accordance with the 4th and 7th
directive of the eu. Additional disclosures required by us gaap are
included in the Notes to the consolidated financial statements.
Use of estimates
The preparation of the Group consolidated financial statements
requires Management to make estimates and assumptions that
affect the reported carrying amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements, and the amounts of revenues and expenses
recognized during the reporting period. Actual results could differ
from those estimates.
New accounting pronouncements
Recently adopted accounting standards
In December 2003, the fasb issued sfas 132 (revised 2003),
“Employers’ Disclosures about Pensions and Other Postretirement
Benefits”. The standard requires that companies provide more details
about their plan assets, benefit obligations, cash flows, benefit costs
and other relevant information on an annual basis. In addition,
companies are required to report the various elements of pension
and other postretirement benefit costs on a quarterly basis. The
guidance is effective for fiscal years ending after December 15,
2003, and for quarters beginning after December 15, 2003. The
Group adopted the standard in the second quarter of 2003/2004
and has disclosed the required information.
In December 2003, the us government passed the Medicare
Prescription Drug, Improvement and Modernization Act (the “Act”)
into law. The law provides for a federal subsidy to sponsors of retiree
health care benefit plans that provide a benefit that is at least