Annual Report 2000 - Česká rafinérská, as

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Annual Report 2000 - Česká rafinérská, as

In the first year in which profit is generated, a joint-stock company should allocate 20% of profit after tax(however, not more than 10% of basic capital) to the legal reserve fund. In subsequent years, the reservefund is allocated 5% of profit after tax until the fund reaches 20% of basic capital. These funds can onlyoffset losses.g) LoansShort- and long-term loans are recorded at face value. Any portion of long-term debt, which is due withinone year, is regarded as short-term debt.h) Financial LeasesThe Group records leased assets by expensing the lease payments and capitalising the residual value ofthe leased assets when the lease contract expires and the purchase option is exercised. Lease paymentspaid in advance are recorded as prepaid expenses and amortised over the lease term.i) Foreign Currency TransactionsAssets whose acquisition or production costs were denominated in foreign currencies were translated tolocal currencies at the exchange rates prevailing at the date of each acquisition.48Foreign currency on hand, and receivables and payables denominated in foreign currencies weretranslated to local currencies at a fixed rate set on the first day of each month through 30 April 1999.Since 1 May 1999, foreign currency on hand, and receivables and payables denominated in foreigncurrency are translated to local currencies based on daily exchange rates. The change was done due toimplementation of a new information system. The balances are adjusted at year-end to the Czech crownsat the exchange rates at 31 December as published by the Czech National Bank.Realised exchange gains and losses and the reserve for unrealised exchange losses are charged orcredited, as appropriate, to income for the year. Unrealised exchange gains and losses are not recognisedor charged, as appropriate, into income until collection or payment of the related foreign currency itemoccurs and are reflected in other liabilities or assets, as appropriate, in the accompanying balance sheet.Unrealised exchange rate losses are reflected as assets in the accompanying balance sheet and areoffset by a reserve with a corresponding charge to income.j) Recognition of Revenues and ExpensesRevenues and expenses are recognised on an accrual basis, when the actual flow of the related goodsor services occurs, regardless of when the related monetary or financial flow arises.In accordance with the accounting principle of prudence, the Group does not record contingent gains atyear-end, whereas foreseeable contingent losses are recorded as they become known.

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