E_mg_GB_03_vorne-29_3_04

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86 A) Basis of Presentation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of mg technologies ag (‘the mg Group’) and the annual financial statements of the mg Group companies included in the consolidated accounts for the fiscal year from January 1 through December 31, 2003 and for the short 2002 fiscal year from October 1 through December 31, 2002 (hereinafter referred to as ‘prior year’) have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). Section 292a of the German Commercial Code (‘HGB’) obviates the requirement to prepare consolidated financial statements according to the HGB if consolidated financial statements prepared according to international accounting standards are of the same value and meaningfulness as consolidated accounts prepared in accordance with the HGB. U.S. GAAP is one of the internationally recognized accounting standards. The euro (a) is the official currency for the mg Group. The figures for the prior year have been adjusted in accordance with SFAS 144 (for further information see Note G) ‘Discontinued operations’. Furthermore, certain prior-year figures have been adjusted. B) Principles of Consolidation Consolidation includes both fully consolidated subsidiaries and associated companies and joint ventures accounted for at equity. All material companies over which mg technologies ag directly or indirectly exerts control are consolidated under the purchase method of accounting. mg technologies ag is deemed to exert control wherever it either directly or indirectly owns a majority of the voting rights and can therefore exert a controlling influence. Variable-interest entities in which mg technologies ag is either directly or indirectly the main beneficiary are also consolidated. Material equity investments on which a significant influence can be exerted (‘associated companies’) as well as joint ventures are accounted for under the equity method. All other investments are accounted for at cost. Consolidated companies with a different balance sheet date from that of the parent company have prepared interim financial statements as of December 31. When the investment in subsidiaries is consolidated under the purchase method, the purchase price is offset against the value of interest held in subsidiaries’ shareholders’ equity at the time of acquisition after the pro rata hidden reserves and hidden liabilities have been disclosed. Any excess purchase price over fair market value of assets acquired and liabilities assumed is capitalized as goodwill. Under the rules of SFAS 142 (‘Goodwill and Other Intangible Assets’), this goodwill is tested for impairment at least once a year and, where necessary, written down. Any shortfall in purchase price over fair market value of assets acquired and liabilities assumed (negative goodwill) is deducted from the carrying amount of certain non-current assets acquired. Under SFAS 141 (‘Business Combinations’), any further shortfall is reported as extraordinary income or, in exceptional cases (‘contingent considerations’), recognized as deferred income. Companies on which significant influence can be exerted (associated companies) and joint ventures are valued under the equity method. This is principally in instances where the mg Group holds between 20% and 50% of the voting rights. Investments valued at equity are reported at the interest held in shareholders’ equity. Recognized changes in the associated company’s shareholders’ equity, including any necessary goodwill write-down and any necessary depreciation, amortization or releases of allocated hidden reserves or liabilities, are recognized as net income from investments.
MANAGEMENT SHARE STRATEGY SPECIAL SECTION MANAGEMENT REPORT FINANCIAL STATEMENTS FURTHER INFORMATION Consolidated Balance Sheets • Statements of Income • Statements of Cash Flows • Statements of Changes in shareholders’ Equity • Fixed Assets Schedule • Notes • Independent Auditors’ Report All material intercompany gains and losses, assets, liabilities, revenues, expenses and income are consolidated as part of the elimination of intercompany gains and losses and the consolidation of liabilities, expenses and income. The consolidation of liabilities essentially means that receivables and liabilities between consolidated Group companies are offset against each other, since the Group – which, according to the entity point of view, constitutes a theoretical single legal entity – cannot report any assets or liabilities with respect to itself. The main purpose of consolidating expenses and income is to offset all expenses and income between fully consolidated subsidiaries against each other. The consolidated statements of income may only report expenses and income resulting from transactions with non-Group entities. The purpose of eliminating intercompany gains and losses is to eliminate intercompany profits and losses resulting from goods and services supplied by one consolidated subsidiary to another, as the Group can only recognize gains or losses if the goods or services were supplied to external third parties, i.e. to non-consolidated companies. If, for example, a consolidated companysupplies assets at a valueexceeding their acquisition or manufacturing cost to another consolidated company, this gives rise to an intercompany gain. If the company that purchased these goods or services is still accounting for them as an asset at the balance sheet date, the asset must be written down by the amount of the intercompany gain (the difference between the asset value reported by the purchasing company and the [Group’s] acquisition or manufacturing cost. This method ensures that assets resulting from goods or services supplied by one consolidated company to another are shown in the consolidated financial statements at the amount that would be reported if the Group were a single company. This intercompany gain is recognized in the future if the asset in question is sold to a non- Group entity or written off. A similar procedure is applied to companies reported at equity. Unless based in countries suffering from hyperinflation, subsidiaries whose reporting currency is not the euro are consolidated according to the functional currency concept. If the local currency is the functional currency, the financial statements are translated into the reporting currency (euro) at modified exchange rates as of the balance sheet date. The financial statements are translated as follows: • Investments in affiliated, consolidated companies and the shareholders’ equity are reported at historical rates, while assets (including goodwill), liabilities and deferred items are shown at mid-rates as of the balance sheet date. • Revenues and expenses are translated at average exchange rates in effect during the year. • Resultant translation adjustments are reported as a separate component of shareholders’ equity (‘accumulated other comprehensive income/loss’). Subsidiaries based in countries suffering from hyperinflation have the euro as their functional currency. Adjustments arising from the translation of the functional currency into euros are recognized in the subsidiary’s statement of income. A country is deemed to suffer from hyperinflation if its cumulative inflation rate over the past three years exceeds 100%. As in 2001/2002, this applies to Turkey. 87
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“2003 was a year of transition fo
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Consolidated Key Figures 2003 RESUL
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Creating freedom for action CONTENT
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MANAGEMENT SHARE STRATEGY SPECIAL S
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zation As the world’s population
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The pharmaceutical industry will co
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Milk Last year, over 160 million co
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MANAGEMENT AKTIE STRATEGIE SONDERTE
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Key Figures for the mg Group RESULT
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