Annual Report 2001 - KSPG AG

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80 Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG Notes Accounting principles (6) Accounting and valuation methods The following unchanged useful lives underlie amortization: The following unchanged asset depreciation ranges (ADRs) apply to property, plant & equipment within tangible assets: Intangible assets Purchased intangible assets are capitalized at (acquisition) cost, internally created intangibles from which the Group is believed to derive future economic benefits and which can reliably be measured are recognized at production cost, either type of intangible asset being amortized by straight-line charges over the estimated useful life. Production cost covers all costs directly allocable to the production process, including any proratable production-related overheads. The cost of finance is not capitalized. R&D costs are principally expensed. Development costs are exceptionally capitalized and amortized on a straight-line basis if a newly developed product or process can be clearly defined, technologically realized and used either internally or is destined for marketing (IAS 38), and if there is a reasonable assurance that its costs will be recovered by future cash inflows. If certain factors hint at an impairment and the recoverable amount is below amortized cost, an intangible asset is written down. Wherever the reason for writedown has ceased to exist, the charge is reversed and the asset written up accordingly. Concessions, franchises, industrial property rights 2-20 years Development costs 5 years Goodwill from consolidation or the statement at equity is amortized over its estimated period of benefit, as a rule 15 to 20 years. The period is estimated with due regard to the Tangible assets Tangible assets are carried at depreciated cost less any write-down. The production cost of internally made tangible assets comprises all costs directly allocable to the production process, including the proratable production-related overheads. Borrowing expected benefits from the market position achieved through the acquisition and from the acquiree’s valueadding potential. costs are not capitalized as part of cost. Tangible assets are principally depreciated on a straight-line basis over their estimated useful lives unless in exceptional cases another method better reflects the pattern of use. IAS 40 is not applied since no investment properties exist. Buildings 20-77 years Other structures 8-20 years Production plant and machinery 3-20 years Other plant, factory and office equipment 2-23 years Tangible assets obtained under capital leases are capitalized at the lower of their fair values or the present value of minimum rents and depreciated over the shorter of their estimated useful lives or underlying lease terms (IAS 17). If certain factors hint at an impairment and the recoverable amount is below depreciated cost, a tangible asset is written down. Wherever the reason for write-down has ceased to exist, the charge is reversed and the asset written up accordingly. Financial assets The shares in nonconsolidated group Long-term loans bearing interest at companies and in associated affiliates not stated at equity and the other fair market rates are carried at par. long-term securities, all shown as The shares in associated affiliates financial assets, are carried at their and joint ventures disclosed as such fair values. The fair value of nonlisted are stated at equity. Based on the cost shares is derived from the going at share acquisition date, the invest- concern value, the latter being determent book value is increased or mined by means of generally accepted decreased to reflect the changes in appraisal and valuation techniques. equity of the associated affiliates or Changes in fair value are not recog- joint ventures to the extent such nized in income until realized. changes are allocable to the shares However, if a value has been impaired held by the Kolbenschmidt Pierburg and fallen below cost, even unrealized losses are recognized in net income. Group. Inventories and prepayments received Inventories are recognized at cost, as a rule applying the average-price method to acquisition cost whereas production cost includes the absorbed costs according to IAS 2 and is determined on the basis of normal workloads. Specifically, capitalized production cost comprises direct costs plus any portions of indirect materials, indirect manufacturing costs (labor, etc.), as well as production-related depreciation and pension expenses, but excludes any borrowing costs (IAS 23). Risks inherent in inventories due to reduced utility or to obsolescence are adequately allowed for. If the net realizable value (NRV) of any inventories at balance sheet date is below their carrying value, such inventories are written down to NRV. If the NRV of inventories previously written down has risen, the ensuing write-up is offset against cost of materials (raw materials and supplies) or shown as increase in inventories of finished products and work in process (WIP). Prepayments received from customers are recognized as liabilities. Receivables and sundry assets Receivables and sundry assets are fair-valued as of the balance sheet capitalized at cost. Adequate allowances provide for bad debts and doubtful accounts. Non-euro receivables are translated at the mean current rate. Short-term securities are date. Changes in fair value are not recognized in income until realized. However, if a value has been impaired and fallen below cost, even unrealized losses are recognized in net income. 81
82 Consolidated financial statements 2001 of Kolbenschmidt Pierburg AG Notes Accounting principles Deferred taxes Deferred taxes are duly recognized on the differences between the values of assets and liabilities in the consolidated balance sheet and those in the individual companies' tax accounts if such different values entail a higher or lower taxable income than would be the case if the consolidated balance sheet prevailed. Differences between the investment book value in the tax accounts and the investee’s equity are not recognized since, for lack of any intention to dispose of such investees, the valuation differences will not reverse in the foreseeable future. Deferred tax assets also include tax reduction claims from the expected future utilization of tax loss carryovers (if their realization is reasonably certain). If the recent history of a company reports a series of losses, deferred tax assets from unutilized tax losses or credits are only recognized to the extent that the company shows sufficient taxable temporary differences or that conclusive substantive evidence exists which suggests with reasonable assurance that sufficient taxable income will be earned by the company to utilize the hitherto unused tax losses or credits. Deferred taxes are determined by applying the local tax rates current or anticipated in each country at the time of realization. Due to the reduction in corporate income tax rates, resolved and meantime enacted in Germany under the tax reform, to a standard 25 percent, the prior-year deferred tax rate had to be clipped from 50 to 40 percent in Germany. Deferred tax assets and liabilities that reverse in future periods were adjusted accordingly, to the debit or credit of net income or equity, depending on whether initially recognized in net income or in reserves. Deferred taxation rates outside of Germany ranged between an unchanged 32.5 and 38 percent. Minority interests Minority interests represent those equity as well as to Group net income. Accruals Accruals for pensions and similar obligations are determined according to the internationally accepted projected unit credit (PUC) method, which is predicated not only on expected future pay and pension increases but also other actuarial assumptions. The actuarial gains and losses ensuing from differences between actuarial assumptions and actual trends of the underlying parameters give rise to a gap between the present value of portions of a subsidiary’s net income and equity which are allocable to shares not held by Kolbenschmidt Pierburg AG, whether directly, or indirectly via other subsidiaries. Minority interests are shown in separate lines, in addition to debt and stockholders’ the defined benefit obligation (DBO) and the pension liabilities accrued in the balance sheet. Actuarial gains and losses outside a 10-percent corridor of the DBO are distributed over the average residual service years of employees. The fair market value of any existing pension fund assets is deducted from pension accruals. Service cost is treated as personnel expense while the interest portion of pension provisions in the fiscal year is shown within the net financial result. Minority interests in losses are offset against the majority interests in the Group’s equity and Group net income unless a contractual obligation exists for the minority shareholders to absorb and offset such losses. The remaining accruals according to IAS 37 provide at balance sheet date for all identifiable legal and constructive commitments and obligations to third parties if based on past transactions or events and if their amount, due date or maturity is uncertain. If the probability of their utilization exceeds 50 percent, accruals are measured at the best estimate of settlement amount. Noncurrent accruals are shown, if the effect of discounting is significant, at the settlement amount discounted as of balance sheet date. Liabilities Pursuant to IAS 39, liabilities are capital leases are recognized at the measured at amortized cost, which as a rule equals their settlement or repayment amounts. Liabilities under Prepaid and deferred items Such items are shown to appropriately Public grants and subsidies for recognize pro rata temporis (p.r.t.) prepaid rents, interest, insurance premiums, non-public investment grants or allowances, etc. present value of rents. Liabilities denominated in any non-euro currency are translated at the mean current rate. capital expenditures are recognized as deferred income in line with IAS 20. Operating income and expenses Net sales (revenues) and other oper- Operating expenses are recognized Derivative financial instruments Within the Kolbenschmidt Pierburg Group, financial derivatives are solely used to hedge against currency and interest rate risks from operations. In the prior-year accounts as of Dec. 31, 2000, valuation units were regularly created between an underlying transaction and the offsetting hedge provided that, if intended and viewed at arm’s length, both the underlying transaction and the hedge were interrelated for one use and functional purpose, with the result that gains and losses from the underlying transactions and the hedge would very likely level. Where currency forwards contrasted with an asset or liability at balance sheet date, currency translation was based on the hedged rate. Where currency forwards referred to cash inflows or outflows in foreign currency, the derivative was not rec- ating income are recognized upon performance of the contract for goods/ services or upon passage of risk to the customer. ognized due to the offsetting effect of the underlying transaction. An accrual provided for impending losses if a derivative was used to hedge proposed currency transactions and its market value was negative. Future interest rate differences from interest rate swaps were not recognized due to the compensatory effect of the underlying transaction. Option premiums paid when contracting interest rate or currency hedges, were carried under sundry assets at the lower of cost or market until the option was either exercised or expired. Upon the first-time application of IAS 39 Financial Instruments as from January 1, 2001, a financial derivative is initially recognized at settlement date, which would normally lag just a few days behind the trading date. Principally, any changes in the fair value of financial derivatives are immediately recognized in net income unless an effective hedge exists that when caused or when the underlying service, etc. is used. satisfies the criteria of IAS 39. In this case, the changes in the derivative’s value would not impact on net income until after the hedged underlying transaction has fallen due or been settled. If the derivative is a cash flow hedge (CFH) and hence used to effectively hedge expected future cash flows, changes in the financial derivative’s fair value are recognized under the other reserves only and not in net income. Changes in the value of financial derivatives used in fair value hedges (FVHs) to effectively hedge the fair value of recognized assets and liabilities are posted to net income as are any changes in the hedged assets or liabilities (where appropriate, by adjusting their book values), with the result that the compensatory effects are all reflected in the income statement. 83
Page 1 and 2: Kolbenschmidt Pierburg AG Rheinmeta
Page 3 and 4: Kolbenschmidt Pierburg at a glance
Page 5 and 6: Contents Agenda of the annual stock
Page 7 and 8: 6 Kolbenschmidt Pierburg AG Supervi
Page 9 and 10: 10 Kolbenschmidt Pierburg AG Letter
Page 11 and 12: 14 Management report on the Kolbens
Page 13 and 14: 18 Management report on the Kolbens
Page 15 and 16: Tool setting prior to machining the
Page 17 and 18: Coating unit for high-duty plain be
Page 19 and 20: Production line for car engine bear
Page 21 and 22: Final assembly of the variable inta
Page 23 and 24: Assembly of the steplessly variable
Page 25 and 26: Alfinizing of diesel piston ring mo
Page 27 and 28: 46 Lagebericht und Konzernlageberic
Page 29 and 30: Testing an engine block for leakage
Page 31 and 32: The PLU 401/121 for continuous fuel
Page 33 and 34: Ecotec test rig at the Neckarsulm p
Page 35 and 36: 62 Kolbenschmidt Pierburg AG Balanc
Page 37 and 38: Consolidated financial statements 2
Page 39 and 40: 70 Consolidated financial statement
Page 43: 78 Consolidated financial statement
Page 55 and 56: 102 Consolidated financial statemen
Page 61: 114 Consolidated financial statemen

Annual Report 2001 - KSPG AG

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