Annual report 2010 - plazacenters

Financial statements
Notes to the consolidated financial statements
continued
Note 3 – Summary of significant accounting policies continued
5. Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealized income and expenses arising from intra-Group transactions, are eliminated
in preparing the consolidated financial statements. Unrealized gains arising from transactions with joint ventures and associates are
eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains,
but only to the extent that there is no evidence of impairment.
b. Foreign currency
1. Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between
amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period,
and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities
denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate
at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in profit or loss,
except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge
of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the
date of the transaction.
2. Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to
euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated to euro at exchange rates
at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive income. Since January 1, 2003, the Group’s date of transition to
IFRSs, such differences have been recognized in the foreign currency translation reserve (translation reserve, or FCTR). When a foreign
operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on
disposal. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment
in a foreign operation and are recognized in other comprehensive income, and are presented within equity in the FCTR.
The EUR is the functional currency for Group companies (with the exception of Indian companies – in which the functional currency is
the Indian Rupee – INR, and the investment in the USA – in which the functional currency is the USD) since it best reflects the business
and results of operations of the Group companies. This is based upon the fact that the EUR (and in India and the USA – the INR and USD
respectively) is the currency in which management determines its budgets, transactions with tenants, potential buyers and suppliers,
and its financing activities and assesses its currency exposures.
3. Net investment in foreign operations.
Differences arising from translation of the net investment in foreign operations are taken to translation reserve. They are released into
the income statement upon disposal.
c. Financial instruments
1. Non-derivative financial assets
The Group initially recognizes loans and receivables and deposits on the date that they are originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognized initially on the trade date at which the Group becomes
a party to the contractual provisions of the instrument. The Group derecognizes a financial asset when the contractual rights to the cash
flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that
is created or retained by the Group is recognized as a separate asset or liability.
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Plaza Centers N.V. Annual report 2010