Form 20-F 2005

final amounts are likely to differ from the estimates used in preparing the Consolidated Financial Statements. Management is also
required to exercise its judgment when applying the accounting methods.
The accounting methods outlined below have been consistently applied to all the periods presented in the Consolidated
Financial Statements, and for the preparation of the IFRS opening Consolidated Balance Sheet at January 1, 2004 for IFRS transition
purposes.
Standards, interpretations and amendments for early adopted standards
The standards, interpretations and amendments for the current standards applicable to the accounting periods beginning on
or after January 1, 2006 that were adopted early by the Group are:
amendment to IAS 19 Employee benefits (published in the OJEU on November 24, 2005 and applicable at January 1, 2006).
This amendment allows for the immediate recognition of actuarial gains and losses relating to post-employment benefits
in equity and provides for the presentation of new disclosures in the notes;
IFRIC 4 Determining whether an arrangement contains a lease (published in the OJEU on November 24, 2005 and applicable
at January 1, 2006). This interpretation provides guidance for determining whether an arrangement constitutes, in substance,
a lease that should be accounted for in accordance with IAS 17 Leases.
Standards, interpretations and amendments to standards already published, but not yet mandatory at December 31, 2005
Amendment of IAS 39 Financial instruments: recognition and measurement–Transition and initial recognition of financial assets
and financial liabilities and IFRS 4 Insurance contracts relating to financial guarantees. The Group estimates that these amendments
should not have a material impact on the value of its commitments.
IFRS 7 Financial instruments: disclosures. Having assessed the impact of IFRS 7, the Group concluded that the main additional
disclosures will focus on market risk sensitivity. The Group will adopt IFRS 7 as of January 1, 2007.
Amendment to IAS 1 Presentation of the financial statements–capital disclosures. The Group will adopt the amendment to
IAS 1 as of January 1, 2007.
2.3. Consolidation principles
Subsidiaries
Subsidiaries over which Rhodia exercises control, directly or indirectly, are fully consolidated. Control is the power to govern
the financial and operating policies of an entity or business so as to obtain benefits from its activities. The Consolidated Financial
Statements include the assets, liabilities and income and expenses of these companies. Rhodia is presumed to exercise control
when it acquires, directly or indirectly, more than 50% of the entity’s voting rights. To assess this control, potential voting rights that
are immediately exercisable or convertible are taken into consideration, including those held by other entities.
Special purpose entities that are, in substance, controlled by Rhodia and in which the Group does not have an equity investment
are considered subsidiaries.
Joint ventures
The companies over which Rhodia exercises a joint control in accordance with contractual arrangements are proportionately
consolidated. The Consolidated Financial Statements include the Group’s share in the assets, liabilities, income and expenses of
these companies.
Form 20 - F 2005 - Rhodia
F-11