CONTENTS - Capgemini

68 ANNUAL
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ACCOUNTING POLICIES
Pursuant to European Commission Regulation No. 1606/2002 of
July 19, 2002, the 2006 consolidated financial statements have been prepared
in accordance with the International Accounting Standards (IAS)
and International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB), as well as the related
interpretations endorsed by the European Union at December 31,
2006 and published in the Official Journal of the European Union.
The Group also takes account of the positions adopted by Syntec
Informatique – an organization representing major consulting and
computer services companies in France – regarding the application
of IFRSs.
The Group has elected to apply from January 1, 2004, IAS 32 – “Financial
Instruments: Disclosure and Presentation”, IAS 39 – “Financial
Instruments: Recognition and Measurement”, and the amendment to
IAS 39 entitled “Cash Flow Hedge Accounting of Forecast Intragroup
Transactions”.
The Group has not opted for early application of certain standards
and interpretations issued by the IASB or the International Financial
Reporting Interpretations Committee (IFRIC) and endorsed by
the European Union at December 31, 2006. This essentially concerns:
IFRS 7 – “Financial Instruments: Disclosures”.
Amendment to IAS 1 – “Presentation of Financial Statements:
Capital Disclosures”.
The Group has not opted for early application of standards and
interpretations issued by the IASB or IFRIC but not yet endorsed
by the European Union at December 31, 2006. This essentially
concerns IFRIC 10 – “Interim Financial Reporting and Impairment”,
whose early adoption would not have had any impact on the 2006
consolidated financial statements.
Certain reclassifications have been made in relation to the amounts
originally reported in the 2005 annual report in order to provide
more accurate information:
“Financial assets” were reclassified to “Other non-current assets”.
“Receivables from social security bodies” were reclassified within
“Other receivables and income taxes”.
The 2006 consolidated financial statements and related notes
were approved by the Board of Directors on February 14, 2007.
The principal accounting policies applied in
the preparation of the consolidated financial
statements are described hereafter:
A) Consolidation methods
The accounts of companies directly or indirectly controlled by Cap
Gemini S.A. are fully consolidated. Cap Gemini S.A. is deemed to
exercise control over an entity when it has the power to govern the
REPORT 2006 Capgemini
financial and operating policies of the entity so as to obtain benefits
from its activities.
Investments in companies which Cap Gemini S.A. directly or indirectly
controls jointly with a limited number of other shareholders
are accounted for by the method of proportional consolidation. This
method consists of consolidating the income and expenses, assets
and liabilities of jointly-controlled companies, on a line-by-line basis,
based on the Group’s percentage interest in their capital.
Investments in associated companies over whose management
Cap Gemini S.A. exercises significant influence, without however
exercising full or joint control, are accounted for by the equity method.
This method consists of replacing the cost of the shares with an amount
corresponding to the Group’s equity in the underlying net assets and
of recording in the income statement the Group’s equity in net
income.
Details of the scope of consolidation are provided in Note 29 – “List
of consolidated companies by country”.
All consolidated companies prepared their accounts at December 31,
2006 in accordance with the accounting policies and methods applied
by the Group.
Intragroup transactions are eliminated on consolidation, as well as
intercompany profits.
The Group does not control any special purpose entities that have
not been consolidated.
B) Use of estimates
The preparation of financial statements involves the use of estimates
and assumptions which may have an impact on the reported values
of assets and liabilities at the balance sheet date or on certain items
of income and expense for the year. Estimates are based on economic
data and assumptions which are likely to vary over time and are
subject to a degree of uncertainty. They mainly concern revenue
recognition on contracts, the recognition of deferred tax assets, asset
impairment tests, and current and non-current provisions.
C) Foreign currency translation
The consolidated financial statements presented in this report have
been prepared in euros.
The balance sheets of foreign subsidiaries are translated into euros
at year-end rates of exchange with the exception of equity accounts,
which are carried at their historical values. Income statements of
foreign subsidiaries are translated into euros at the average rates
of exchange for the year. However, for certain material transactions,
it may be relevant to use a specific rate of exchange. Differences
arising from the translation at different rates are recognized
directly in equity under “Translation adjustments” and have
no impact on profit.