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)Revenue recognitionSales of goods are recognised when goods are delivered and title haspassed to the customer. Sales of services are recognized net of sales taxesand discounts when the services have been provided. Interest income isaccrued on a timely basis, by reference to the principal outstanding and atthe effective interest rate applicable.Foreign currenciesTransactions in currencies other than KM are initially recorded at the ratesof exchange prevailing on the date of the transactions. Monetary assetsand liabilities denominated in such currencies are retranslated at therates ruling on the balance sheet date. Foreign exchange profits andlosses arising on exchange are included in net profit or loss for the period.Borrowing costsBorrowing costs are charged to the statement of income in the periodincurred.LeasingLeases are classified as finance leases whenever the terms of the leasetransfer substantially all the risks and rewards of ownership to the lessee.All other leases are classified as operating leases.The Company as lesseeAssets held under finance leases are recognised as assets of the Companyat their fair value at the date of acquisition or, if lower, at the presentvalue of the minimum lease payments. The corresponding liability to thelessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance charges and reduction of thelease obligation so as to achieve a constant rate of interest on the remainingbalance of the liability. Finance charges are charged to the statementof income in the period incurred.Rentals payable under operating leases are charged to income on astraight-line basis over the term of the relevant lease.Employee benefitsOn behalf of its employees, the Company is paying pension and healthinsurance on and from salaries, which are calculated on the gross salarypaid, as well as taxes, which are calculated on the net salary paid. TheCompany is paying the above contributions into the Federal Pension andHealth Fund, as per the set legal rates during the course of the year on thegross salary paid. In addition, meal allowances, transport allowances andvacation bonuses are paid in accordance with the local legislation. Theseexpenses are recorded in the income statement in the period in which thesalary expense is incurred.Retirement severance paymentsAccording to the local legislation and internal Rulebook on employment,the Company makes retirement severance payments of minimum 4average monthly salaries of the employee in question or 4 averagesalaries paid in the Federation of Bosnia and Herzegovina in the periodpreceding the retirement date, according to the latest data published bythe Federal Bureau of Statistics, depending on what is more favorable tothe employee. The Company has no other defined post-retirement benefitplans for its employees or Management in Bosnia and Herzegovina.serving Your health INDEPENDENT AUDITOR’S REPORT ANNUAL REPORT 06 59