Financial Statements - Solvay

Key assumptions & key sources
of estimation uncertainty
In the application of the Group’s accounting policies, which are described on pages 62-66, management is required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at
the balance sheet date which, if they were to change, would have a signifi cant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next fi nancial year.
Full consolidation of the companies of the SolVin Group on July 1
With the planned shutdown of SolVin’s electrolysis at Zandvliet (a BASF site), by the end of 2012 at the latest, as
announced on September 16, 2008, all major restructuring plans contemplated in the initial business plan of the Joint
Venture agreed between Solvay and BASF have been carried out by SolVin on units operated on BASF sites, and
consequently Solvay has decided, in agreement with BASF, to fully consolidate SolVin as from July 2008.
Cash generating units
The essential part of the goodwill comes from the Fournier acquisition in 2005. To the extent that this goodwill represents
in each country synergies which will benefi t all Pharmaceuticals Sector products, goodwill cannot be allotted by product,
but only by region. As a result, the cash-generating units used for the annual impairment tests on this particular goodwill
item are based on the regions.
Development costs
Management considers that development costs in the Pharmaceuticals Sector generally do not meet the criteria for
recognition as an asset because technical feasibility has not yet been demonstrated. Consequently those development
costs are expensed when incurred.
Functional currency
Management considers that the functional currency of Solvay Pharma in Russia is the euro, consistent with the economic
substance of the transactions relevant to that entity.
Consequently, the fi nancial statements of this subsidiary have been denominated in euro.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to
which goodwill has been allocated. The value in use calculation requires management to estimate the future cash fl ows
expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
Further details are provided in note 23.
Deferred tax assets
The carrying amount of a deferred tax asset is reviewed at each balance sheet date. The carrying amount of a deferred
tax asset is reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow
the benefi t of part or all of that deferred tax asset to be utilized. Any such reduction is reversed to the extent that
it becomes probable that suffi cient taxable profi t will be available.
The Corporate tax competence center, which has the overview of the Group deferred tax situation, is systematically
involved in assessing deferred tax assets.
Financial
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Solvay Global Annual Report 2008
Financial