Annual Report 2005

Notes relating to the consolidated annual accounts
de all costs which can be directly or indirectly attributed to the manufacturing process. Financing costs and research costs are not shown as assets. Licences are
written off by the end of the term of the licence. Five years has been taken as the useful life of software.
Unscheduled depreciation is also applied to intangible assets specified on the closing date if the recoverable amount is below the continued acquisition and manufacturing
costs. If the reasons for unscheduled depreciation in previous years should cease to apply, the value will be adjusted upwards.
Intangible assets with an indefinite useful life will not be subject to the scheduled straight-line method of depreciation but will be checked regularly once a year
to substantiate their value -and also at more frequent intervals if evidence shows that it is necessary. If necessary, depreciation will be applied and their value will
be reduced to a lower recoverable amount. If the reasons for unscheduled depreciation in previous years should cease to apply, the value will be adjusted upwards.
Tangible fixed assets
Tangible fixed assets which have been used by the company for more than one year are valued at their acquisition or manufacturing costs less scheduled depreciation.
The manufacturing costs of systems produced in-house include a reasonable share of the attributable overheads in addition to individual costs. Financing
costs are not shown as assets within the acquisition or manufacturing costs. Investment grants received and independent investment grants are taken into account
by deducting the amount of the grant from the acquisition or manufacturing costs of the asset in question.
Depreciation of assets is only carried out using the straight-line method. Scheduled depreciation within the Group is based on the following useful lives:
Buildings 50 years
Fixtures and fittings 12-30 years
Plant and equipment 6-12 years
Machines 6-15 years
Assets of negligible value are regularly written off in full in the year of acquisition.
If evidence shows that it is necessary to reduce the value of assets and the recoverable amount is below the continued acquisition or manufacturing costs, then
the assets will be subject to unscheduled depreciation. If the reasons for unscheduled depreciation should cease to apply, values will be adjusted upwards accordingly.
Leasing
The equitable ownership of leased objects is to be attributed to the lessee in accordance with IAS 117 “Leases” if the lessee is to retain all the main risks and
rewards associated with the object (financial leasing). All other leases are classified as operating leases. If the equitable ownership is to be attributed to the
Neschen Group, then the leased object will be shown as an asset at fair value or the current value of the lease payments if lower when the lease is concluded.
Scheduled depreciation will take place over the useful life of the object or over the term of the lease if it is shorter, in accordance with comparable objects acquired
as tangible fixed assets. Payment obligations arising from future lease payments will be shown as liabilities.
Financial assets
Financial assets include those which are kept by the Neschen Group for longer than one period for the purpose of capital gain, increasing the value of capital
employed or building up business relations.
If they do not relate to associated companies within the context of IAS 28 “Shares in associated companies”, financial assets are capitalised in accordance with
IAS 39 “Financial instruments: recognition and measurement”. Financial assets are valued at (continued) acquisition cost or at fair value and entered on the trading
day depending on how they are classified in accordance with IAS 39.
Financial assets which are to be classified as being “available for sale” will be valued at acquisition cost when they are first entered in the accounts. If the fair
values of these financial assets can be reliably determined during subsequent periods, then these will be used; if there are no active markets and the costs involved
in determining fair values cannot be justified, then the (continued) acquisition costs will be shown. Borrowings will be classified as “advances and debts managed
by the company” and consequently carried at continued acquisition cost. Financial assets which are designated as a secured transaction within a fair value
hedge will be carried at fair value.
Fluctuations in value resulting from financial assets from the “available for sale” category will be shown in the shareholders’ equity capital without affecting the
result - if necessary taking account of deferred taxes. The amounts entered without affecting the result will not be included in the result for the period until the
time of deduction or in the case of the sustained depreciation of the assets.
Evidence of depreciation will be taken into account by applying appropriate unscheduled depreciation to the lower recoverable amount.
Inventories
Inventories are recognised at their acquisition cost, manufacturing cost or their net realisable value, according to whichever is the lower. Manufacturing costs include
production and material overheads, depreciation and pro rata production-related general administrative costs as well as directly attributable costs. Fixed overheads
are taken into account based on the normal utilisation capacity of production systems. Costs of production capacities not utilised (idle costs) are shown in
the profit and loss account within the costs of performance realised. The value of inventories will be adjusted if acquisition or manufacturing costs go above the
expected net realisable value or are dependent on range stocked.
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