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5 CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1 Accounting Policies 1.1 – Accounting standards The consolidated fi nancial statements have been prepared in compliance with the international accounting standards (IFRS) as adopted by the European Union as of December 31, 2011. The same accounting methods were used as for the consolidated fi nancial statements for the year ended December 31, 2010. The following standards and interpretations that were applicable during the period did not have a material impact on the consolidated fi nancial statements as of December 31, 2011: • amendment to IAS 32 – Classifi cation of Rights Issues; • amendment to revised IAS 24 – Information on Related parties; • 2010 improvements to IFRS (May 2010); • amendment to IFRIC 14 – Prepayment of a Minimum Funding Requirement; • IFRIC 19 – Extinguishing Financial liabilities with Equity instruments. There are no differences in practice between the standards applied by Schneider Electric as of December 31, 2011 and the IFRS issued by the International Accounting Standards Board (IASB), since the application of standards and interpretations that are mandatory for reporting periods beginning on or after January 1, 2011 but not yet adopted by the European Union would not have a material impact. Lastly, the Group did not apply the following standards and interpretations that had not yet been adopted by the European Union as of December 31, 2011 or that are mandatory at some point subsequent to December 31, 2011: • Standards adopted – IFRS 7 – Disclosures – Transfert of Financial assets • Standards not yet adapted – amendment to IAS 1 – Presentation of Items of Other Comprehensive Income; – IAS 12 – Recovery of Underlying Assets; – IAS 19 revised – Employee benefi ts; – IAS 27 revised – Separate Financial Statements; – IAS 28 revised – Investments in associates and joint-ventures; – amendments to IAS 32 – Offsetting Financial assets and Financial liabilities; – amendments to IFRS 7 – Disclosures – Transfer of Financial assets; – IFRS 9 – Financial instruments; – IFRS 10 – Consolidated Financial Statements; – IFRS 11 – Joint Arrangements; – IFRS 12 – Disclosure of Interests in Other entities; – IFRS 13 – Fair value Measurement; – amendment to IFRS 1 – Severe Hyperinfl ation and Removal of Fixed dates for First-Time Adopters; – IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine. 160 2011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC Schneider Electric is currently assessing their potential impact on the Group’s consolidated fi nancial statements. At this stage of analysis, the Group does not expect the impact on its consolidated fi nancial statements to be material, except for IFRS10 and IFRS 11 for which impacts are being assessed on entities currently consolidated with proportional consolidation, and except for IFRS 9 due to uncertainties surrounding the adoption process in Europe. The fi nancial statements provide data prepared in accordance with IFRS for the years ended December 31, 2011 and December 31, 2010. The fi nancial statements for the year ended December 31, 2009, presented in the Registration Document registered with Autorité des Marchés Financiers (AMF) under number D10-0125 on March 19, 2010, are incorporated by reference. 1.2 – Basis of presentation The fi nancial statements have been prepared on a historical cost basis, with the exception of derivative instruments and available- forsale fi nancial assets, which are measured at fair value. Financial liabilities are measured using the amortised cost model. The book value of hedged assets and liabilities and the related hedging instruments corresponds to their fair value. 1.3 – Use of estimates and assumptions The preparation of fi nancial statements requires Group and subsidiary management to make estimates and assumptions that are refl ected in the amounts of assets and liabilities reported in the consolidated balance sheet, the revenues and expenses in the statement of income and the obligations created during the reporting period. Actual results may differ. These assumptions mainly concern: • the measurement of the recoverable amount of goodwill, property, plant and equipment and intangible assets (note 1.10); • the realisable value of inventories and work in process (note 1.12); • the recoverable amount of accounts receivable (note 1.13); • the valuation of share-based payments (note 1.19); • the calculation of provisions for contingencies, in particular for warranties (note 1.20); • the measurement of pension and other post-employment benefi t obligations (note 22). 1.4 – Consolidation principles Subsidiaries over which the Group exercises exclusive control, either directly or indirectly, are fully consolidated. Exclusive control is control by all means, including ownership of a majority voting interest, signifi cant minority ownership, and contracts or agreements with other shareholders. Group investments in entities controlled jointly with a limited number of partners, such as joint ventures and alliances, are proportionally consolidated in accordance with the recommended treatment under IAS 31 - Interests in Joint Ventures.
Companies over which the Group has signifi cant infl uence (“associates”) are accounted for by the equity consolidation method. Signifi cant infl uence is presumed to exist when more than 20% of voting rights are held by the Group. Companies acquired or sold during the year are included in or removed from the consolidated fi nancial statements as of the date when effective control is acquired or relinquished. Intra-group balances and transactions are eliminated. The list of consolidated subsidiaries and associates can be found in note 32. The reporting date for all companies included in the scope of consolidation is December 31, with the exception of certain associates accounted for by the equity method. For the latter however, fi nancial statements up to September 30 of the fi nancial year have been used (maximum difference of three months in line with the standards). 1.5 – Business combinations Business combinations are accounted for using the acquisition method, in accordance with IFRS 3 - Business Combinations. In accordance with the option provided by IFRS 1 – First-Time Adoption of IFRS – business combinations recorded before January 1, 2004 have not been restated. Material acquisition costs are presented under “Other operating income and expenses” in the statement of income. All acquired assets, liabilities and contingent liabilities of the acquiree are recognised at their fair value, following a measurement period that can last for up to 12 months from the date of acquisition. The excess of the cost of acquisition over the Group’s share in the fair value of assets and liabilities at the date of acquisition is recognised in goodwill. Where the cost of acquisition is lower than the fair value of the identifi ed assets and liabilities acquired, the negative goodwill is immediately recognised in the statement of income. Goodwill is not amortised, but tested for impairment at least annually and whenever there is an indication that it may be impaired (see note 1.10 below). Any impairment losses are recognised under “Amortisation and impairment of purchase accounting intangibles”. 1.6 – Translation of the financial statements of foreign subsidiaries The consolidated fi nancial statements are prepared in euros. The fi nancial statements of subsidiaries that use another functional currency are translated into euros as follows: • assets and liabilities are translated at the offi cial closing rates; • income statement and cash fl ow items are translated at weighted- average annual exchange rates. Gains or losses on translation are recorded in consolidated equity under “Cumulative translation adjustments”. In accordance with IFRS 1 – First Time Adoption of IFRS – cumulative translation adjustments were reset to zero at January 1, 2004 by adjusting opening retained earnings, without any impact on total equity. CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.7 – Foreign currency transactions Foreign currency transactions are recorded using the offi cial exchange rate in effect at the date the transaction is recorded or the hedging rate. At the balance sheet date, foreign currency payables and receivables are translated into the functional currency at the closing rates or the hedging rate. Gains or losses on translation of foreign currency transactions are recorded under “Net fi nancial income/(loss)”. Foreign currency hedging is described below, in note 1.22. 1.8 – Intangible assets Intangible assets acquired separately or as part of a business combination Intangible assets acquired separately are initially recognised in the balance sheet at historical cost. They are subsequently measured using the cost model, in accordance with IAS 38 – Intangible Assets. Intangible assets (mainly trademarks and customer lists) acquired as part of business combinations are recognised in the balance sheet at fair value, appraised externally for the most signifi cant assets and internally for the rest. The valuations are performed using generally accepted methods, based on future infl ows. The assets are regularly tested for impairment. Intangible assets are amortised on a straight-line basis over their useful life or, alternatively, over the period of legal protection. Amortised intangible assets are tested for impairment when there is any indication that their recoverable amount may be less than their carrying amount. Amortisation and impairment losses on such intangible assets are presented on a separate statement of income line item, “Amortisation and impairment of purchase accounting intangibles”. Trademarks Trademarks acquired as part of a business combination are not amortised when they are considered to have an indefi nite life. The criteria used to determine whether or not such trademarks have indefi nite lives and, as the case may be, their lifespan, are as follows: • brand awareness; • outlook for the brand in light of the Group’s strategy for integrating the trademark into its existing portfolio. Non-amortised trademarks are tested for impairment at least annually and whenever there is an indication they may be impaired. When necessary, an impairment loss is recorded. Internally-generated intangible assets Research and development costs Research costs are expensed in the statement of income when incurred. Systems were set up to track and capitalise development costs in 2004. As a result, only development costs for new products launched since 2004 are capitalised in the IFRS accounts. 2011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 161 5
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Registration Document 2011 Financia
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Registration Document Financial and
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distinctions that are both an achie
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Interview with Schneider Electric r
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Supervisory Board (as of February 2
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Sales by geography 18% Rest of the
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2011 in brief Growth and acquisitio
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1 Description of the Group, and its
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1.3 The emergence of sustainable ci
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DESCRIPTION OF THE GROUP, AND ITS S
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2. Leader in an industry of the fut
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Specifiers: in search of efficient
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3.2 A platforms strategy The growin
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These procedures include quarterly
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The Group may be exposed to the ris
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Legal risks The Group’s products
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• in North America, a captive ins
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2 Sustainable development 1. Sustai
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3 SUPERVISORY CORPORATE GOVERNANCE
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6 BALANCE 220 COMPANY FINANCIAL STA
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7 GENERAL GENERAL PRESENTATION OF S
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ANNUAL AND EXTRAORDINARY SHAREHOLDE
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274 PERSONS RESPONSIBLE FOR THE REG
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Schneider Electric SA Headquarters:
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