ANNUAL REPORT 06 - Bosnalijek dd

Bosnalijek d.d.Notes to financial statements for the year ended 31 December 2006(All amounts are expressed in thousands of KM)3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (‘IFRS’), as published by the InternationalAccounting Standards Board. The financial statements have beenprepared on the historical cost basis, except for the revaluation of certainfinancial instruments. The financial statements are presented in Convertiblemarks since that is the functional currency of the Company. TheConvertible mark (KM) is officially tied to the Euro (EUR 1 = KM 1.95583).The preparation of financial statements in conformity with IFRS requiresmanagement to make estimates and assumptions that effect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and their reportedamounts of revenues and expenses during the reporting period. Theseestimates are based on the information available as at the date of theconsolidated financial statements and actual results could differ fromthose estimates.Certain amounts in the previous year financial statements have beenreclassified to conform to the current year presentation.3.1. Adoption of new and revised standardsIn the current year, the Company has adopted all of the new and revisedStandards and Interpretations issued by the International AccountingStandards Board (the IASB) and the International Financial ReportingInterpretations Committee (the IFRIC) of the IASB that are relevant to itsoperations and effective for annual reporting periods beginning on 1January 2006. The adoption of these new and revised Standards andInterpretations has not resulted in changes to the Company’s accountingpolicies.At the date of authorization of these financial statements, the followingStandard, relevant for the Company’s financial statements, was in issuebut not yet effective and not:• IFRS 7 Financial Instruments: Disclosures and complementaryamendments to IAS 1 Presentation of Financial Statements - Effective forannual periods beginning on or after 1 January 2007.At the date of authorization of these financial statements, the followingStandard and Interpretations were in issue but not yet effective and notrelevant for the Company’s financial statements:• IFRS 8 Operating Segments - Effective for annual periods beginning onor after 1 January 2009;• IFRIC 7 Applying the Restatement Approach under IAS 29, FinancialReporting in Hyperinflationary Economies - Effective for annual periodsbeginning on or after 1 March 2006;• IFRIC 8 Scope of IFRS 2 - Effective for annual periods beginning on orafter 1 May 2006;• IFRIC 9 Reassessment of Embedded Derivatives - Effective for annualperiods beginning on or after 1 June 2006;• IFRIC 10 Interim Financial Reporting and Impairment - Effective forannual periods beginning on or after 1 November 2006;• IFRIC 11 IFRS 2 Group and Treasury Share Transaction - Effective forannual periods beginning on or after 1 March 2007;• IFRIC 12 Service Concession Arrangements - Effective for annual periodsbeginning on or after 1 January 2008.The directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material financial impact onthe financial statements of the Company.58 ANNUAL REPORT 06 INDEPENDENT AUDITOR’S REPORT