2005 Annual report - Virbac

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64 Notes to the consolidated financial statements General information Virbac is not only the ninth veterinary laboratory worldwide, it is also the world’s leading independent laboratory dedicated exclusively to animal health, with a comprehensive range of products for both companion and food producing animals. Virbac’s shares have been listed on the second market of the Paris stock exchange since June 1985 (the second market subsequently became the Eurolist, on which Virbac is listed in compartment B). Virbac Is a French limited company with a management structure comprising a Management board and a Supervisory board (société anonyme à Directoire et Conseil de surveillance). Its trade name is “Virbac”. The Company was formed in Carros in 1968. Under the Company’s current Memorandum and articles of association, its duration is set to expire on 2 January 2028, subject to any further extension thereof. The registered office is located at 1 avenue 2065 LID, 06511 Carros, France. The Company is registered on the Grasse trade and companies register under number 417350311 RCS Grasse. The financial statements for the year ended 31 December 2005 were finalised by the Management board on 30 March 2006. The following notes to the financial statements form an integral part of the consolidated financial statements. Post-balance sheet events No significant events occurred after the balance sheet date. Accounting principles applied Pursuant to regulation 1606/2002 of the European Council adopted on 19 July 2002, the Group’s published consolidated financial statements for the year ended 31 December 2005 have been prepared in accordance with the International financial reporting standards (IFRS), which have been endorsed at European level. The comparative information for 2004 has been restated in accordance with the principles defined in IFRS 1 on the firsttime adoption of IFRS. These consolidated financial statements, which were previously prepared in accordance with French GAAP (regulation 99-02), have been restated in order to comply with the same standards as those applied for the year ended 31 December 2005. As regards the year ended 31 December 2004, the Group chose to apply early the following standards: ◆ IFRS 5: non-current assets held for sale and discontinued operations, ◆ IAS 32 and 39: financial instruments. As regards the presentation of the consolidated financial statements for the year ended 31 December 2005, the Group has not applied early any standards not already in force as at 31 December 2005. Scope of consolidation ❖ The consolidated financial statements for the year ended 31 December 2005 comprise the financial statements of those companies that Virbac, de jure or de facto, directly or indirectly controls, with the exception of companies of insignificant size. A list of consolidated companies is provided in the notes to the financial statements. ❖ Changes to the consolidation scope during the period were as follows: ◆ the acquisition during the period of Virbac Hellas and Animedica, two companies in Greece, both of which are fully-owned by Virbac, ◆ the accounting by the equity method of a German company acquired in 2003 and in which Virbac has a 24% shareholding, ◆ the accounting by the equity method of a Finnish company formed in 2005 and under the joint control of Virbac and another third-party company, ◆ following the issue of shares by Virbac Corporation, the purpose of the issue being to provide shares for issue to employees under stock option plans, Virbac’s interest in Virbac Corporation fell from 60.21% to 60.09% at 31 December 2005. Consolidation rules Consolidation method ❖ The financial statements of companies under the exclusive control of Virbac are fully consolidated. Those companies over which Virbac exercises joint control or significant influence are accounted for by the equity method. ❖ All companies have been consolidated on the basis of financial statements drawn up to 31 December 2005.
65 Translation of financial statements The functional currency of the Group’s foreign subsidiaries is their local currency. The financial statements of foreign companies whose functional currency is not the euro are translated in accordance with the following principles: ❖ balance sheet items are translated at the exchange rate ruling on the balance sheet date. The translation adjustment resulting from the use of a different exchange rate on opening shareholders’ equity is recorded in shareholders’ equity in the consolidated balance sheet, ❖ income statement items are translated at the average rate for the financial year. The translation adjustment resulting from the use of an exchange rate that is different from the balance sheet rate is recorded in shareholders’ equity in the consolidated balance sheet. Specific rule regarding the first-time adoption of IFRS: the Group has chosen to adopt the option offered by IFRS 1, which involves resetting to zero the translation reserve previously calculated on the translation into euros of the financial statements of the foreign subsidiaries. The balance of the translation reserve as at 1 January 2004 has therefore been transferred to general reserves, with no impact on the Group’s total shareholders’ equity. The gains or losses on any subsequent disposals of foreign entities will be adjusted only by those accumulated translation adjustments arising after the date of transition to IFRS. Elimination of inter-company transactions ❖ All transactions between Group companies are eliminated. ❖ Other intra-Group transactions: ◆ unrealised gains on inventories purchased from other Group companies are eliminated, ◆ intra-Group dividend payments are recorded in reserves at their gross amount. Accounting policies Assets and liabilities are classified in the balance sheet as current and non-current. Those assets and liabilities with an estimated maturity of one year or less are classified as current. Intangible assets In accordance with the criteria stipulated in IAS 38, an intangible asset is recognised as an asset in the balance sheet if it is probable that the future economic benefits attributable to the asset will flow to the Group. Intangible assets with indefinite useful lives are reviewed annually to ensure that their useful lives have not become finite. Intangible assets with finite useful lives are amortised on a straight-line basis as from the date on which the asset is ready for use: ❖ concessions, patents, licences and trademarks: amortised over their useful life, ❖ software (office tools, etc): amortised over three or four years, ❖ ERP: amortised over ten years. Research and development costs are capitalised from the time when they satisfy the criteria stipulated by IAS 38. As regards the Group’s activities, most of the development costs are associated with products the use of which requires the obtaining of a market authorisation. The Group considers that, until this authorisation has been obtained, not all of the criteria of IAS 38 have been fulfilled and the costs incurred are expensed. In accordance with the provisions of IAS 36 “Impairment of assets”, intangible assets are tested for impairment annually. In the case of assets with indefinite useful lives, the tests are carried out during the second half of the year, regardless of whether or not there is any indication of impairment. Assets with finite useful lives are tested for impairment as soon as any new events or circumstances indicate that assets may be impaired. For the purposes of this testing, the Group takes into account sales generated by the intangible asset. When testing intangible assets for impairment, the Group combines a market value approach (estimate of fair value) and an approach based on estimated future cash flows (estimate of value in use). The future cash flows used for the impairment tests are calculated on the basis of estimates made over a period that may vary between a minimum of five years and a maximum of twenty years. For the purposes of these calculations, the Group uses a discount rate of 10%. Goodwill Goodwill recognised on the asset side of the balance sheet represents the excess of the acquisition cost of the shares in the acquired companies over the Group’s share of the fair value of the identifiable assets, liabilities and contingent liabilities acquired. It also includes any business goodwill acquired. In accordance with the provisions of IAS 36 “Impairment of assets”, the value of goodwill is tested annually. Impairment testing is carried out during the second half of the year, regardless of whether or not there is any indication of impairment, and as soon as any new events or circumstances indicate that assets may be impaired. For the purposes of this testing, assets are grouped by cash-generating units (CGU). In the case of goodwill, it is the legal entity that is used as the CGU. When carrying out the tests, the Group combines a market value approach (estimate of fair value) and an approach based on estimated future cash flows (estimate of value in use). For the purposes of the market value approach, the Group compares the carrying amount of the CGU with multiples of the operating profits generated by them. If this approach identifies the risk of impairment for a CGU, further testing
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2005 Annual report Passionate about
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Bringing our expertise and care to
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1 Contents A message from the Chair
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3 Éric Marée Chairman of the Exec
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5 Breakdown of shareholders in term
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7 In 2005, 30% of sales were genera
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9 Cash flow (in € million) 39.9 2
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11 • A new freeze-dryer with a ca
Page 17 and 18: 13 Finance and stock market Share p
Page 20 and 21: 2005 Annual Report 16 Innovation Mo
Page 22 and 23: 2005 Annual Report 18 The customer
Page 24 and 25: 20 2005 Annual Report The Virbac-Pa
Page 26 and 27: 2005 Annual Report 22 Industrial co
Page 28 and 29: 2005 Annual Report 24 Human resourc
Page 30: 2005 Annual Report 26
Page 33 and 34: 29 Management report 2005 Virbac sa
Page 35 and 36: 31 ❖ Equine Equine products close
Page 37 and 38: 33 ❖ In Portugal 2005 sales at Vi
Page 39 and 40: 35 Acquisitions and disposals Virba
Page 41 and 42: 37 Consolidated balance sheet and f
Page 43 and 44: 39 A resolution will be submitted f
Page 45 and 46: 41 - Member of the Management board
Page 47 and 48: 43 ◆ Investors and analysts are w
Page 49 and 50: 45 ◆ checking air emissions, ◆
Page 51 and 52: 47 Virbac in France Workforce Virba
Page 53 and 54: 49 Report of the Chairwoman of the
Page 55 and 56: 51 financial information, execution
Page 57 and 58: 53 This organisation, put in place
Page 59 and 60: 55 the recognition of transactions
Page 61 and 62: 57 The Industrial operations depart
Page 63 and 64: 59 Consolidated financial statement
Page 65 and 66: 61 Consolidated financial statement
Page 67: 63 Consolidated financial statement
Page 71 and 72: 67 Inventories and work-in-progress
Page 73 and 74: 69 In the case of exchange rate hed
Page 75 and 76: 71 Notes to the consolidated financ
Page 77 and 78: 73 Property, plant and equipment by
Page 79 and 80: 75 Note B7 - Deferred income tax As
Page 81 and 82: 77 Note B12 - Employee benefits (
Page 83 and 84: 79 Note R1 - Sales Sales breakdown
Page 85 and 86: 81 Note R6 - Breakdown of net incom
Page 87 and 88: 83 Note A4 - Composition of Virbac
Page 89 and 90: 85 Note A10 - Consolidation scope a
Page 91 and 92: 87 Transition to IFRS Consolidated
Page 93 and 94: 89 Transition to IFRS LIABILITIES A
Page 95 and 96: 91 Transition to IFRS Breakdown of
Page 97 and 98: 93 Supervisory board report The Exe
Page 99 and 100: 95 As required by law, details of t
Page 101 and 102: 97 ❖ to record the finalisation o
Page 103 and 104: 99 Index Page 5 ◆ Shareholder str
Page 105: Virbac 13 ème rue LID - BP 27 0651
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2005 Annual report - Virbac

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