Annual Report 2003 - Kardex

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FINANCIAL INFORMATION REGARDING THE KARDEX REMSTAR GROUP
Notes to the consolidated financial statements
LONG-TERM CONTRACTS
Insofar as the requirements of Swiss GAAP FER 22 are
met, revenue under long-term contracts is recognized
according to the percentage-of-completion method. At
the same time, revenues and manufacturing costs are
shown in proportion to the stage of project completion.
Profits are shown proportionally, whereas any losses
expected to occur from individual projects are recognized
fully when identified. No financing costs for long-term
contracts are capitalized.
FIXED ASSETS
Fixed assets are shown at acquisition cost. Depreciation
is factored in on a straight-line basis over the estimated
useful lives, as follows:
Buildings 20–40 years
Leasehold improvements Lease term
Machinery and equipment
Office and business equipment,
5–15 years
motor vehicles 3–20 years
Fixed assets used on a financial lease basis are capitalized
and treated as if they were fixed assets purchased
outright. They are initially recorded in the appropriate fixedasset
category at the discounted present value of the
contractual lease payments, and are depreciated over
their estimated useful lives on a straight-line basis. The
corresponding liabilities are included in the balance sheet.
Maintenance and repairs are charged against net profits.
When fixed assets are sold, their historical cost and accumulated
depreciation are removed from the books, and
the resulting profit or loss is reflected in the income statement.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arising from the purchase of subsidiaries is capitalized
in the balance sheet from the date of their first consolidation.
Essentially, this applies to subsidiaries of strategic
importance that open up new markets or serve to
expand the Group, and which are of financial significance
for the Group. In consideration of the existing market
share, potential sales growth and other factors, management
has estimated the useful life of goodwill to be 20
years. The remaining net book value of goodwill is re-
viewed annually and, in the event that it exceeds its expected
future usefulness, the difference is written off and
charged against net profit.
Other intangible assets such as patents, trade rights,
software and development costs are capitalized at acquisition
cost. Amortization of other intangible assets is carried
out on a straight-line basis over their expected useful
lives, which are limited to the following:
Patents, trade rights and know-how 10 years
Software 5 years
Development costs 5 years
OTHER FINANCIAL ASSETS
Other financial assets are valued at purchase costs or at
lower market value.
REVENUES
Revenue from the sale of goods and royalty income is
recognized at the time of delivery. Earnings from service
agreements are credited to income on a straight-line
basis over the term of the agreement. Pro-rata profit from
long-term projects determined using the percentage-ofcompletion
method is recorded gross in the income statement,
i.e., as revenues and costs.
INCOME TAXES
The taxes due on the income of individual Group companies
are set aside. Deferred tax is also shown in the accounts.
Provisions for deferred taxes take into account
the effect on income tax resulting from differences between
the principles used by the tax authorities and those
obtained using Swiss GAAP FER principles. Provisions for
deferred taxes are made on the basis of local tax rates.
Non-refundable withholding taxes on the distributable
retained earnings of subsidiaries are also apportioned.
Tax-deductible loss carry-forwards are capitalized as long
as it seems probable that will actually be realized.
WARRANTIES
Provisions are made for recognizable risks resulting from
the sale of products and services. Generally, warranties
are valid for a period of six to twelve months.