E_mg_GB_03_vorne-29_3_04

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92 Certain changes in shareholders’ equity included as a separate component are reported as ‘accumulated other comprehensive income/loss’. This includes the cumulative translation adjustment, unrealized gains and losses on the marking-to-market of securities and hedging transactions, and the minimum pension liability. Accrued liabilities for pensions and other postretirement obligations are valued according to the projected unit credit method. The amounts reported are based on calculations by independent actuaries. Provisions for taxes and other accruals and liabilities are reported when an obligation to a third party exists, there is a likelihood of its crystallization, and its amount can be reasonably estimated. If the amount of the necessary provision or accrual or liability can only be computed to within a certain range, the most likely amount is reported; if the amounts are equally likely, the lowest is reported. Provisions for warranties and for impending losses are computed on the basis of manufacturing costs. Provisions for guarantees covering third-party financial obligations and for guarantees covering changes in the value of underlying instruments are shown at their fair value, irrespective of the likelihood that the obligation will materialize. Liabilities are reported at their repayment amount. Non-interest-bearing and low-interest-bearing liabilities due after one year are discounted at the prevailing market interest rate as of the balance sheet date. Interest is added to the liabilities in the following periods at this interest rate. Receivables and liabilities denominated in foreign currency are translated at the rate prevailing at the balance sheet date. Translation gains and losses are generally recognized in income. Revenue is recognized from the sale of products – after deduction of bonuses and discounts – once title to the assets has passed to the buyer and the contract has been completed. This presupposes that the price has been – or can be – determined and that receipt of the outstanding receivable is likely. In cases where products are supplied on a sale-or-return basis, revenue is not recognized until acceptance has been confirmed by the customer. Revenue from maintenance and service contracts is realized as and when the services are performed. Revenue on long-term contracts is generally recognized under the percentage-of-completion method. Research and development costs that are not contract related and are not reimbursed by the customer are expensed as incurred. Otherwise they are recognized as part of the contract cost and capitalized. Basic earnings per share is calculated by dividing net income (after minority interests) by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by adjusting the number of shares outstanding for potential dilutive stock options, convertible debt and notes, and profit-sharing rights.
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 With respect to the Group’s stock option plan underlying its stock-based compensation scheme, the <strong>mg</strong> Group applies the provisions of SFAS 123 ‘Accounting for Stock-Based Compensation’ and has elected to account for the options under the fair value method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The compensation cost for the fiscal year ended – included as part of functional costs – is shown under additional paid-in capital. The <strong>mg</strong> Group uses financial instruments purely for hedging purposes, in particular in order to mitigate the risk of interest rate fluctuations inherent in financing transactions and to hedge against currency risk and price movements. Fair value hedges are used to hedge assets or liabilities and firm commitments against a clearly defined market risk. Cash flow hedges are used to hedge future cash flows generated by existing balance sheet items, forecasted transactions and currency-hedged firm commitments. Under SFAS 133 (‘Accounting for Derivative Instruments and Hedging Activities’), as amended by SFAS 137 (‘Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133’), SFAS 138 (‘Accounting for Certain Derivative Instruments and Certain Hedging Activities – an Amendment of FASB Statement No. 133’), and SFAS 149 (‘Amendment of Statement 133 on Derivative Instruments and Hedging Activities’), all derivatives are reported at their fair value as ‘Other assets’ or ‘Other liabilities’. With fair value hedges, gains and losses resulting from changes in the fair values of derivatives and their underlying transactions are recognized in income. With cash flow hedges, the hedge-effective part of the changes in fair value is initially recognized in shareholders’ equity (accumulated other comprehensive income). It is only recorded in the statements of income when the hedged underlying transaction has been recognized in income. The hedge-ineffective part of the changes in fair value is immediately recognized in income. Unrealized gains and losses resulting from changes in the fair value of derivatives not included in hedge accounting (essentially derivatives used to hedge assets and liabilities denominated in foreign currency as well as commodities futures) are always immediately recognized in income. The preparation of the consolidated financial statements in accordance with the principles of proper accounting requires management to make estimates and assumptions that have an impact on the Group’s net assets, liabilities, provisions and accrued liabilities, deferred tax assets and liabilities, income and expense shown in the consolidated financial statements as well as the contingent assets and liabilities reported. Although these estimates and assumptions are assumed to be realistic, we cannot guarantee that they turn out to be correct. These estimates and assumptions may contain risks and uncertainties that cause the actual figures to differ from these forward-looking estimates. 93
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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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The MODUL tablet press produced by
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Page 45 and 46: For a technology-driven organizatio
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Page 81 and 82: mg's mission is to ensure sustainab
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MANAGEMENT AKTIE STRATEGIE SONDERTE
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Key Figures for the mg Group RESULT
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E_mg_GB_03_vorne-29_3_04

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