Annual report 2005 - Xeikon

Dividends on ordinary shares are recognised in equity
in the period in which they are declared. Where
the company or its subsidiaries purchase its own or
its parent company’s equity share capital, the
consideration paid, including any attributable
transaction costs, net of income taxes, is deducted from
the total shareholders’ equity as treasury shares until
they are cancelled. Where such shares are subsequently
sold or reissued, any consideration received is included
in shareholders’ equity.
Provisions
Provisions are recognised when the group has a present
legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate
of the amount can be made.
Warranty
The operating group recognises the estimated liability
to repair or replace its products still under warranty
at the balance sheet date. This provision is calculated
based on the past history of the level of repairs and
replacements or on a basis of best estimates.
Onerous contracts
The operating group recognises a provision for onerous
contracts when the expected benefits to be derived
from a contract are less than the unavoidable costs of
meeting the obligations under the contract.
Restructuring
Restructuring provisions mainly comprise lease termination
penalties and employee termination payments, and
are recognised in the period in which the group becomes
legally or constructively committed to payment.
A constructive obligation to restructure arises only when
an entity:
• has a detailed formal plan for restructuring; and
• has raised a valid expectation in those affected that
it will carry out the restructuring by starting to
implement that plan or announcing its main features
to those affected by it.
Capitalisation of borrowing costs and interest
Borrowings are recognised initially at the proceeds
received, net of transaction costs incurred. In subsequent
periods, borrowings are stated at amortised cost using
the effective yield method; any difference between
proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the
period of the borrowing. When borrowings are
repurchased or settled before maturity, any difference
between the amount repaid and the carrying amount is
recognised immediately in the income statement.
Revenue recognition
Revenue is recognised when significant risks and rewards
have been transferred to the buyer, when the group no
longer retains significant management involvement in
the sold item, when it is probable that the economic
benefits associated with a transaction will flow to the
enterprise, when the amount of the revenue can be
measured reliably and when the costs incurred can be
reliably measured.
Sales are recognised net of sales tax and discounts.
Revenue from rendering services is recognised by
reference to the stage of completion when this can
be measured by reference to labour hours incurred
prior to the year end as a percentage of total estimated
labour hours for the contract. When the outcome of the
transaction involving the rendering of services cannot
be estimated reliably, revenue is recognised only to the
extent of the expenses recognised that are recoverable.
No revenue is recognised on barter transactions involving
the exchange of similar goods and services. Interest
is recognised on a time proportion basis that reflects
the effective yield of the asset. Royalties are recognised
on an accrual basis in accordance with the terms of
agreements. Dividends are recognised when the
shareholders’ right to receive payment is established.
Employee benefit costs
Employees benefits are generally paid in cash and
expensed to the income statement.
Costs relating to the ongoing activities of the group are
not provided for in advance. Any fixed assets that are no
longer required for their original use are transferred to
current assets and carried at the lower of the carrying
amount or the fair value less costs to sell.
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