Notes to the consolidated financial statements - Efacec

In view of the fact that applying these standards was not mandatory for the fi nancial year beginning 1 January 2008, the Group
decided not to adopt them immediately.
It is estimated however that there would be no signifi cant impact from applying them to the consolidated fi nancial statements of
the Group for those standards which are applicable to the group.
The preparation of the fi nancial statements in accordance with the International Financial Reporting Standards requires the use of
some important accounting estimates. It also requires that the management entity uses its judgement in the process of applying
the accounting policies of the company.
1.2 Consolidation
(a) Subsidiaries
Subsidiaries are all those entities (including those Entities with Special Purposes) over which the Group has the power of decision
concerning fi nancial and operational policies, generally where it holds over half of the voting rights. The existence and the impact
of potential voting rights currently exercisable or convertible is taken into consideration when it is assessed whether the Group
has control over another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group, and are
excluded from consolidation from the date on which that control ceases.
The purchase method is used to account for the acquisition of subsidiaries. The cost of acquisition is measured by the fair value
of the goods delivered, the instruments of share capital issued, the liabilities incurred or assumed on the date of acquisition, plus
the directly attributable costs of acquisition. The identifi able assets acquired and the contingent liabilities taken on in a business
merger are initially measured at their fair value on the date of acquisition, irrespective of the existence of minority interests. The
excess of the cost of acquisition compared to the fair value of the Group’s share of the identifi able assets acquired is booked as
goodwill (IFRS 3). If the cost of acquisition was less than the fair value of the net assets of the acquired subsidiary, the difference
is refl ected directly in the Profi t and Loss Account.
The transactions, balances and unrealised gains on operations that took place between group companies are eliminated. Unrealised
losses are also eliminated, except if the transaction shows evidence of impairment relating to a transferred asset. The accounting
policies of subsidiaries were changed whenever deemed necessary to ensure consistency with the policies used by the Group.
The amount of Minority Interests is included in Shareholders’ Funds.
The list of subsidiaries included in the consolidation perimeter is shown in Chapter G, as well as the respective impacts.
(b) Associates
Associates are all those entities over which the Group exercises a signifi cant infl uence but where the Group does not have control,
generally shareholdings having between 20% and 50% of voting rights. Investments in associates are accounted for using the
equity method and are initially booked at cost. Investment of the Group in associates includes goodwill (from which accumulated
impairment losses are deducted) that was identifi ed on acquisition (see Note 1.6).
The share of the Group in gains and losses of its associates after acquisition is refl ected in the Profi t and Loss Account and its share
of movements in reserves after acquisition is refl ected in reserves and in the accounting value of the investment. When the share
of the Group in the losses of the associate is equal to or greater than the investment in the associate, including receivables not
covered by guarantees, the Group does not recognize additional losses, unless they have been caused by bonds or if the Group
made payments in the name of the associate.
If the cost of acquisition was less than the fair value of the net assets of the associates acquired, the difference is booked directly
to Profi t and Loss.
The goodwill identifi ed on acquisition of associates, less accumulated impairment losses, is shown in a specifi c line in the Balance
Sheet.
Unrealised gains on transactions with associates are eliminated when Group shareholdings are increased in associates. Unrealised
losses are also eliminated, except if the transaction reveals evidence of impairment of a transferred asset. Accounting policies of
associates are changed whenever necessary, to ensure consistency with the policies used by the Group.
(c) Joint Ventures
Interest in jointly controlled entities are booked the proportional consolidation method. The Group adds its share of profi ts/losses,
assets, liabilities and cash fl ows of joint ventures on a line by line basis with similar items of the Group Consolidated Financial
Statements.
The Group recognises the proportion of gains and losses on the sale of Group assets to the Joint Venture that is attributable to
other partners. It does not recognize its share in the gains or losses of the joint venture that result from the purchase by the Group
of assets belonging to the joint venture until it sells them to an independent entity. The loss on the transaction is immediately
recognised if there is evidence of a reduction in the value of the net realisable value of current assets, or of an impairment loss.
The accounting policies of joint ventures are changed whenever deemed necessary, to ensure consistency with the policies used
by the Group.
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