Annual report 2012 - Comrod

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Annual report 2012 20/92Strategies and values | Group | Parent company | Corporate governance | ContactAnnual report Financial statement Notes2.4 Business combination and goodwillBusiness combinations from 1 January 2010Business combinations are accounted for usingthe acquisition method. Companies that areacquired or disposed of during the year areincluded in the consolidated accounts from thedate at which control is obtained and until controlceases. The cost of an acquisition is measured asthe aggregate of the consideration transferred,measured at acquisition date fair value and theamount of any non-controlling interest in theacquiree. For each business combination, theacquirer measures the non-controlling interestin the acquiree either at fair value or at theproportionate share of the acquiree’s identifiablenet assets. Acquisition cost incurred are expensedand included in administrative expenses.When the Group acquires a business, it assessesthe financial assets and liabilities assumed forappropriate classification and designation inaccordance with the contractual term, economiccircumstances and pertinent conditions as theacquisition date. This includes the separation ofembedded derivatives in host contracts by theacquiree.If the business combination is achieved in stages,the acquisition date fair value of the acquirer’spreviously held equity interest in the acquiree isremeasured to fair value at the acquisition datethrough profit or loss.Any contingent consideration to be transferredby the acquirer will be recognised at fair valueat the acquisition date. Subsequent changes tothe fair value of the contingent considerationwhich is deemed to be an asset or liability,will be recognised in accordance with IAS 39either in profit or loss or as a change to othercomprehensive income. If the contingentconsideration is classified as equity, it shouldnot be remeasured until it is finally settled withinequity.Goodwill is initially measured at cost being theexcess of the aggregate of the considerationtransferred and the amount recognised for noncontrollinginterest over the net identifiableassets acquired and liabilities assumed. If thisconsideration is lower than the fair value ofthe net assets of the subsidiary acquired, thedifference is recognised in profit or loss.After initial recognition, goodwill is measured atcost less any accumulated impairment losses.For the purpose of impairment testing, goodwillacquired in a business combination is, from theacquisition date, allocated to each of the Group’scash-generating units that are expected to benefitfrom the combination, irrespective of whetherother assets or liabilities of the acquiree areassigned to those units.Where goodwill forms part of a cash-generatingunit and part of the operation within that unitis disposed of, the goodwill associated with theoperation disposed of is included in the carryingamount of the operation when determining thegain or loss on disposal of the operation. Goodwilldisposed of in this circumstance is measuredbased on the relative values of the operationdisposed of and the portion of the cash-generatingunit retained.20
Annual report 2012 21/92Strategies and values | Group | Parent company | Corporate governance | ContactAnnual report Financial statement Notes2.5 Cash & cash equivalentsCash and cash equivalents consists of cash inhand and at bank. Any positive balances againstbank overdrafts are included as a componentof cash and cash equivalents in the cash flowstatement. The cash flow statement has beenprepared using the indirect method. In the balancesheet, bank overdrafts are included as short-term loans.2.6 Trade receivablesTrade receivables are part of the category loansand receivables and are recognized at nominalamount less provision for bad debt (being areasonable proxy for fair value). Individual tradereceivables are impaired when managementassess them not to be wholly or partiallycollectible.2.7 HedgingHedging of net investmentsForeign exchange gains and losses on the hedginginstrument (interest bearing debt) relating tothe effective portion of the hedge are recognizedin other comprehensive income in equity; gainsand losses relating to the ineffective portion arerecognized in the income statement.Upon disposal of the foreign operation cumulativelosses or gains recorded as other comprehensiveincome in equity are taken to the incomestatement.2.8 InventoriesInventories are recognized at the lower ofhistorical cost and net realizable value. The netrealizable value is the estimated sales price undernormal circumstances less the estimated costof completion, marketing and distribution. Thehistorical cost is based on the average cost price,and includes expenses accrued for the purchaseof the goods and the cost of bringing the goods totheir current state and location. Goods producedby the Company itself include variable and fixedcosts that can be allocated based on normalcapacity utilization.2.9 Property, plant and equipmentProperty, plant and equipment are recognized athistorical cost, less accumulated depreciation andimpairments.The historical cost of property, plant andequipment is the purchase price plus costsdirectly associated with preparing them for use.Expenses accrued after the property, plant orequipment is entered into service, such as ongoingmaintenance, are taken to the income statement,whilst other expenses that are expected to conferfuture financial benefits are recognised in thebalance sheet.The historical cost of non-current assets isdepreciated to their residual value over theiranticipated useful life, which is:Buildings 6-40 yearsMachinery and equipment 3-8 yearsFixtures, fittings and vehicles 3-10 yearsThe depreciation period and method is assessedannually. The same applies to scrap value.When the carrying amount of property, plantand equipment is higher than the estimatedrecoverable amount, carrying amount is writtendown to the recoverable amount.Work in progress is classified as property, plantand equipment and is recognized at its historical21
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Annual report 2012 - Comrod

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