2005 Annual Report - Touax

note 1.5. Translation of foreign currencies
note 1.5.1. Translation of financial statements
in currencies of foreign subsidiaries
The Group’s operating and presentation currency is
the euro.
The operating currency of foreign companies is
generally the local currency. Where the majority of
transactions are effected in a third currency, the
operating currency is this third currency.
The financial statements of the Group’s foreign companies
are prepared in their operating currency. The
financial statements of foreign companies are translated
into the Group’s presentation currency (euro)
as follows:
2 the assets and liabilities of foreign subsidiaries
are translated into euros at the closing exchange
rate;
2 shareholders’ equity, maintained at the historic
rate, is translated at the closing rate;
2 the income statements and cash flows are translated
at the average exchange rate for the period;
2 losses or gains resulting from the translation of
the financial statements of foreign companies are
carried in a translation reserve included in consolidated
shareholders’ equity.
Goodwill generated when a foreign company is
acquired is entered in the operating currency of the
acquired company. It is then translated, at the closing
rate, into the Group’s presentation currency.
The differences resulting from this translation are
carried in consolidated shareholders’ equity.
In accordance with the option authorized by IFRS 1
“First-time adoption of IFRS”, the Group has chosen
to reclassify under “Consolidation reserves” the
“Translation reserves” accumulated as at 1 January
2004 resulting from the translation of the financial
statements of foreign subsidiaries.
When a foreign subsidiary is sold, the currency
translation differences accumulated in the
“Translation reserves” account since 1 January 2004
are taken to the income statement as a component
of the profit or loss on the disposal.
note 1.5.2. Translation of transactions in foreign
currencies
Transactions in foreign currencies effected by
consolidated companies are converted into their
operating currency at the exchange rates prevailing
on the date of the transaction.
Monetary assets and liabilities in foreign currencies
are translated at the exchange rate on the closing
date. Differences resulting from this translation
(unrealized gains and losses) are stated in the financial
result.
Currency differences relating to a monetary element
which, in substance, forms an integral part of the net
investment in a consolidated foreign subsidiary are
entered in shareholders’ equity (in the “Translation
reserves” item) up until the time of disposal or liquidation
of this net investment.
note 1.6. Accounting for asset securitization
transactions
Asset securitization transactions have been effected
in the “Shipping Containers” business with the creation
of the trusts CLR 95, TCLRT 98 and TLR 2001,
and in the “Modular Buildings” business with the
formation of GIE Modul Finance I.
These securitization transactions have enabled the
Group to increase its capacity as an operating lessor
by calling upon external investors to acquire the
assets necessary for the Group’s leasing and service
activities and to provide the financing.
Each of these securitization transactions has been
analyzed in detail and in substance in the light of
interpretation SIC 12 “Consolidation – Special
Purpose Entities (cf. below). On this basis, the Group
does not control any special purpose entities.
Consequently, the Trusts and GIE Modul Finance I
are not consolidated by the TOUAX Group.
These transactions and their impacts on the financial
statements are described in the notes to the
consolidated financial statements note 27.6 page 89,
note 27.7 page 91, note 27.8 page 92 and note 27.9
page 95).
■ Analysis of asset securitization transactions
Paragraph 10 of SIC 12 states: “In addition to the
situations described in IAS 27.13, the following circumstances,
for example, may indicate a relationship
in which an entity controls an SPE [special purpose
entity] and consequently should consolidate the SPE
(additional guidance is provided in the Appendix to this
Interpretation):
(a) in substance, the activities of the SPE are being
conducted on behalf of the entity according to its specific
business needs so that the entity obtains benefits
from the SPE’s operation;
(b) in substance, the entity has the decision-making
powers to obtain the majority of the benefits of the activities
of the SPE or, by setting up an “autopilot” mechanism,
the entity has delegated these decision-making
powers;
(c) in substance, the entity has rights to obtain the
majority of the benefits of the SPE and therefore may
be exposed to risks incident to the activities of the
SPE; or
(d) in substance, the entity retains the majority of the
residual or ownership risks related to the SPE or its
assets in order to obtain benefits from its activities.”
annual report 2005
Consolidated accounts
53