Engineering

3.6 Consolidated financial statements Notes to the consolidated financial statements
A complete listing of the Group’s subsidiaries and equity interests is
presented in Note 38.
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable
assets, liabilities and contingent liabilities of a subsidiary, associate or
jointly-controlled entity at the date of acquisition. Goodwill is
recognized as an asset and is tested for impairment annually, or on
such other occasions that events or changes in circumstances indicate
that it might be impaired.
Goodwill arising on the acquisition of an associate or a jointlycontrolled
entity is included within the carrying amount of the associate
or the jointly-controlled entity, respectively. Goodwill arising on the
acquisition of subsidiaries is presented separately in the balance sheet.
On disposal of a subsidiary, associate or jointly-controlled entity, the
attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Foreign currency translation
The functional and reporting currency of ThyssenKrupp AG and its
relevant European subsidiaries is the Euro (€). Transactions
denominated in foreign currencies are initially recorded at the rates of
exchange prevailing on the dates of the transactions. Monetary assets
and liabilities denominated in such currencies are retranslated at the
rates prevailing on the balance sheet date. Profits and losses arising
on exchange are included in the net profit or loss for the period.
Financial statements of the foreign subsidiaries included in the Group
consolidated financial statements where the functional currency is
other than the Euro are translated using their functional currency which
is generally the respective local currency. The translation is performed
using the current rate method, in which balance sheet amounts are
translated to the reporting currency using the rates of exchange
prevailing on the balance sheet date, while income statement amounts
are translated using the period’s average exchange rates. Net
exchange gains or losses resulting from the translation of foreign
financial statements are accumulated and included in equity. Such
translation differences are recognized as income or as expenses in the
period in which the operation is disposed of.
Consolidated financial statements
134 | 135
Companies that manage their sales, purchases, and financing
substantially not in their local currency use the currency of their
primary economic environment as their functional currency. Using the
functional currency in these cases involves translating non-monetary
items such as non-current assets, including scheduled depreciation,
and equity to the functional currency using the average exchange rates
of the respective year of addition. All other balance sheet line items are
translated using the exchange rate as of the balance sheet date and all
other income statement line items are translated using the period’s
average exchange rates. The resulting translation differences are
included in the consolidated statement of income as “Other operating
income or expenses”. Thereafter, the functional currency financial
statements are translated into the reporting currency using the current
rate method.
The exchange rates of those currencies significant to the Group have
developed as follows:
Currencies
Exchange rate as of
(Basis €1)
Sept. 30,
2010
Sept. 30,
2011
Annual average exchange rate
for the year ended
Sept. 30,
2010
Sept. 30,
2011
US Dollar 1.37 1.35 1.36 1.40
Brazilian Real
Chinese
2.32 2.51 2.40 2.30
Renminbi Yuan 9.13 8.61 9.25 9.12
Intangible assets
Intangible assets with finite useful lives are capitalized at cost and
amortized on a straight-line basis generally over a period of 3 to 15
years, depending on their estimated useful lives. Technology resulting
from the acquisition of Howaldtswerke-Deutsche Werft (HDW) is
amortized over a period of 40 years. Useful lives are examined on an
annual basis and adjusted when applicable on a prospective basis.
The amortization expense of intangible assets is primarily included in
the “cost of sales” line item in the consolidated statement of income.