Siegfried Annual Report 2009

of discounted future cash flows. Various criteria are applied
to determine if there is objective evidence of an impairment
loss. These criteria include significant financial difficulty of
the issuer, a breach of contract, danger of bankruptcy, disappearance
of an active market, etc. In the case of equity
investments classified as available-for-sale, a significant or
prolonged decline in the fair value of the security below its
cost is evidence that the assets are impaired.
Inventories Inventories are carried in the Balance Sheet at
the lower of acquisition/production costs and net realizable
value. Production costs comprise all manufacturing costs
including an appropriate share of production overheads.
Costs are assigned to inventory based on the “first-in, firstout”
method. Appropriate valuation allowances are made
for obsolete and slow-moving inventory items. Net realizable
value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses. Intercompany
profits on inventories of goods produced in the Group
are eliminated from net profit.
Trade receivables Trade receivables are included initially
at fair value and subsequently at amortized cost; this is equal
to the amounts invoiced after deducting allowances for
doubtful accounts. Indications for possible impairment are
given if payment is delayed, the customer is experiencing
financial difficulties or recapitalization or bankruptcy is likely.
Allowances for doubtful accounts are established based on
the difference between the net present value of the nominal
amount of the receivables and the estimated net collectible
amount. The expected loss is recognized in the Income
Statement in the caption “Marketing and sales”. When a
trade receivable becomes uncollectible, it is written off
against the allowance for doubtful accounts.
Other current assets Other current assets consist of
advance payments for deliveries of goods or services,
prepayments and accrued income and other amounts
receivable. They are recorded at net realizable value.
Cash Cash consists of cash, balances held in postal and
bank accounts and short-term deposits with a maturity
of three months or less from the date of acquisition. Cash is
the defined fund of the Consolidated Cash Flow Statement.
Non-current assets held for sale Non-current assets
are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than
through continuing use. Non-current assets held for sale are
measured at the lower of their carrying amount and fair value
less costs to sell.
Equity/Treasury shares A purchase of treasury shares
by a Group company, including all costs (net after taxes), is
recorded against equity, until the shares are redeemed,
issued again or sold. If treasury shares are issued or sold at a
later date, the net consideration less directly attributable
transaction costs and income taxes is recorded in equity.
Transactions with minority interests are treated using the
Economic Entity method like treasury share transactions.
Therefore all payments for the purchase of minority interests
or sales proceeds on the sale of minority interests are recorded
over equity. Any differences compared with the minority
interests carried in the Balance Sheet are eliminated through
the reserves.
Financial liabilities All financial liabilities are recorded
under current or non-current financial liabilities. They are
valued at amortized cost and any difference between the
amount received (less transaction costs) and the settlement
amount is recognized in the Income Statement over the
period of the loan using the effective interest method.
The non-current financial liabilities include all liabilities
with a residual duration of more than one year. The current
financial liabilities include all liabilities with a duration of less
than one year, including the current portion of non-current
liabilities. If at the reporting date there is a binding commitment
to extend a maturing loan, it is classified according
to the new duration.
Provisions Provisions are calculated according to uniform,
consistent operating criteria. They are intended to cover
identifiable risks of loss and payment liabilities. Provisions are
recorded if the Group has, as a result of a past event, a present
obligation (legal or constructive) that will probably (more
likely than not) result in an outflow of economic resources
and if a reasonable estimate of that obligation can be made.
Provisions are discounted to their net present value. Increases
in provisions due to interest effects are recorded as interest
expenses. Possible obligations that are dependent on
future events or where no reasonable estimate of the obligation
can be made, are not recorded, but disclosed as contingent
liabilities.
Financial Statements Siegfried Group 77