The Vorwerk Annual Report 2OO8

EXPLANATORY NOTES TO FINANCIAL STATEMENTSI. Introductory RemarksFor the financial year 2008, as in previousyears, Vorwerk & Co. KG is publiclydisclosing its worldwide consolidatedfinancial statements in accordancewith the provisions containedin the German Publication and DisclosureLaw (PublG) and the GermanCommercial Code (HGB) governingconsolidated financial statements andgroup annual reports. A record of theaffiliated and associated companiesgiving the direct or indirect participationsin them (§ 313, Section 2 Nos. 1and 2 of the HGB) is contained in aseparate listing of investment holdings(§ 313, Section 4 of the HGB).II. Consolidated GroupThe parent company is Vorwerk & Co.KG (Holding Company). The Groupcompanies do business in the followingcommercial segments: production anddirect sales of high-quality householdappliances and cosmetic, facial andbody-care products as well as infrastructuralfacility services and carpets. In theyear under review nine newly-foundedor acquired companies have been includedin the consolidated figures forthe first time. Two companies have beenremoved from the consolidated figuresbecause they were liquidated or sold.Further, the remaining 10 per cent heldby other shareholders in Vorwerk’s LuxAsia Pacific were acquired in the businessyear under review. The domesticakf banking group and a foreign-basedlogistics company have been includedin the figures at equity as associatedcompanies in accordance with the provisionsof §§ 311 and 312 of the HGB.Two associated companies of lesser significancehave not been incorporatedin the consolidated figures pursuant to§ 311, Section 2 of the HGB, but havebeen included at acquisition cost.III. Accounting and ValuationMethodsThe balance sheet and the profit andloss account are laid out for reportingpurposes in accordance with the formatstipulated in §§ 290 ff, 266 and 275 of theHGB for corporate entities.For disclosure purposes, the option providedfor under the German Publicationand Disclosure Law (to show capital, reservesand profit as partners’ equity) hasbeen exercised. In this respect the investmentsof silent partners have also beenincluded in partners’ equity on accountof the fact that they are provided witha subordination clause and since theyare of an equity-capital-similar nature.Moreover, with respect to § 13, Section3, Clause 2 of the PublG, information isalso provided in the explanatory notesto the consolidated financial statementsas per § 5, Section 5 of the same PublG.In this respect taxes and profit for theyear have been included with other operatingcosts under the collective heading“Other items not shown separately”.Vorwerk & Co. KG’s accounting andvaluation principles also pertain to theconsolidated financial statements. Thefinancial statements of non-Germansubsidiaries drawn up in accordancewith national rules and regulations andat variance with to German legal requirementshave been adjusted in linewith what is known as the HandelsbilanzII (Type II Commercial Balance Sheet).The valuation methods applied can beregarded as a uniform valuation as definedin § 308, Section 1 of the HGB. Theyhave remained unchanged from thoseapplied in previous year apart fromsome insignificant modifications regardingwrite-down of low-value assets andthe changeover from declining-balanceto straight-line depreciation of tangiblefixed assets for the German companies.Purchased intangible assets have beenvalued at their cost of acquisition lessscheduled straight-line amortization. Inthe case of tangible fixed assets, wherethe period of usefulness is limited, theacquisition or manufacturing cost hasbeen depreciated (straight-line or declining-balance)at reasonable, scheduledrates.As a rule, the straight-line method ofdepreciation has been used for all additionsup till1 January 2008 where thisresulted in higher amounts of depreciation.The tax-relevant benefits of depreciatinglow-value assets have beentaken advantage of. Financial assetshave been valued at cost or lower attributablevalue. The movements in fixedassets can be seen in the corresponding“Movements in Fixed Assets” table.Inventory has been valued at averageacquisition cost or manufacturing costin accordance with the principle oflowest value. Apart from direct costs,the manufacturing costs only includereasonable proportions of the materialand manufacturing overheads involved.Receivables and other assets havebeen shown at nominal value less appropriateprovisions for bad debts andother write-downs. Marketable securitieshave been assessed at acquisition costor at the lower attributable value prevailingas of balance sheet date plusproportionate incidental costs for acquiringsuch. Liquid funds have beenstrated at nominal value.Revaluations have been effected inaccordance with § 280, Section 1 ofthe HGB. All identifiable risks anduncertain liabilities have been ad-46