2009 Annual Report - CRH

the Group and one or more other venturers under a contractual arrangement, are
accounted for on the basis of proportionate consolidation from the date on which
the contractual agreements stipulating joint control are finalised and are
derecognised when joint control ceases. The Group combines its share of the joint
ventures’ individual income and expenses, assets and liabilities and cash flows on
a line-by-line basis with similar items in the Consolidated Financial Statements.
Loans to joint ventures are classified as loans and receivables within financial
assets and are recorded at amortised cost.
Associates
Entities other than subsidiaries and joint ventures in which the Group has a
participating interest, and over whose operating and financial policies the Group is
in a position to exercise significant influence, are accounted for as associates
using the equity method and are included in the Consolidated Financial Statements
from the date on which significant influence is deemed to arise until the date on
which such influence ceases to exist. If the Group’s share of losses exceeds the
carrying amount of an associate, the carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that the Group
has incurred obligations in respect of the associate.
Equity method
Under the equity method, which is used in respect of accounting for the Group’s
investments in associates, the Consolidated Income Statement reflects the
Group’s share of profit after tax of the related associates. Investments in associates
are carried in the Consolidated Balance Sheet at cost adjusted in respect of postacquisition
changes in the Group’s share of net assets, less any impairment in
value. Goodwill relating to the associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment. Where
indicators of impairment arise in accordance with the requirements of IAS 39
Financial Instruments: Recognition and Measurement, the carrying amount of the
investment is tested for impairment by comparing its recoverable amount with its
carrying amount.
Minority interests
Minority interests represent the portion of profit or loss and net assets not held by
the Group and are presented separately in the Consolidated Income Statement
and within equity in the Consolidated Balance Sheet, distinguished from Parent
Company shareholders’ equity. Acquisitions of minority interests are accounted for
using the parent entity extension method whereby the difference between the
consideration and the book value of the share of net assets acquired is recognised
in goodwill.
Transactions eliminated on consolidation
Intra-group balances and transactions, income and expenses, and any unrealised
gains or losses arising from such transactions, are eliminated in preparing the
Consolidated Financial Statements. Unrealised gains arising from transactions
with joint ventures and associates are eliminated to the extent of the Group’s
interest in the entity. Unrealised losses are eliminated in the same manner as
unrealised gains, but only to the extent that there is no evidence of impairment in
the Group’s interest in the entity.
Revenue recognition
Revenue represents the value of goods and services supplied to external
customers and excludes intercompany sales, trade discounts and value added
tax/sales tax. Other than in the case of construction contracts, revenue is
recognised to the extent that it is subject to reliable measurement, that it is
probable that economic benefits will flow to the Group and that the significant risks
and rewards of ownership have passed to the buyer, usually on delivery of the
goods.
Construction contracts
Revenue on construction contracts is recognised in accordance with the
percentage-of-completion method with the completion percentage being
computed generally by reference to the proportion that contract costs incurred at
the balance sheet date bear to the total estimated cost of the contract. Contract
costs are recognised as incurred. When the outcome of a construction contract
cannot be estimated reliably, contract revenue is recognised only to the extent of
contract costs incurred that are likely to be recoverable. When the outcome of a
construction contract can be estimated reliably and it is probable that the contract
will be profitable, contract revenue is recognised over the period of the contract.
When it is probable that total contract costs will exceed total contract revenue, the
expected loss is recognised immediately as an expense. If circumstances arise
that may change the original estimates of revenues, costs or extent of progress
towards completion, estimates are revised. These revisions may result in increases
or decreases in revenue or costs and are reflected in income in the period in which
the circumstances that give rise to the revision became known by management.
Segment reporting
Operating segments are reported in a manner consistent with the internal
organisational and management structure and the internal reporting information
provided to the chief operating decision maker who is responsible for allocating
resources and assessing performance of the operating segments. The Group has
determined that it has six reportable operating segments based on its lines of
business; materials, products and distribution in Europe and the Americas.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which the
entity operates (“the functional currency”). The Consolidated Financial Statements
are presented in euro, which is the presentation currency of the Group and the
functional currency of the Parent Company.
Transactions in foreign currencies are recorded at the rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date. All currency
translation differences are taken to the Consolidated Income Statement with the
exception of all monetary items that provide an effective hedge for a net investment
in a foreign operation. These are recognised in other comprehensive income until
the disposal of the net investment, at which time they are recognised in the income
statement.
Results and cash flows of subsidiaries, joint ventures and associates with noneuro
functional currencies have been translated into euro at average exchange
rates for the year, and the related balance sheets have been translated at the rates
of exchange ruling at the balance sheet date. Adjustments arising on translation of
the results of non-euro subsidiaries, joint ventures and associates at average
rates, and on restatement of the opening net assets at closing rates, are dealt with
in a separate translation reserve within equity, net of differences on related currency
borrowings. All other translation differences are taken to the Consolidated Income
Statement.
On disposal of a foreign operation, accumulated currency translation differences
are recognised in the Consolidated Income Statement as part of the overall gain
or loss on disposal. Goodwill and fair value adjustments arising on acquisition of a
foreign operation are regarded as assets and liabilities of the foreign operation, are
expressed in the functional currency of the foreign operation, are recorded in euro
at the exchange rate at the date of the transaction and are subsequently
retranslated at the applicable closing rates.
The principal exchange rates used for the translation of results, cash flows and
balance sheets into euro were as follows:
Average Year-end
euro 1 = 2009 2008 2009 2008
US Dollar 1.3948 1.4708 1.4406 1.3917
Pound Sterling 0.8909 0.7963 0.8881 0.9525
Polish Zloty 4.3276 3.5121 4.1045 4.1535
Ukrainian Hryvnya 11.2404 7.7046 11.4738 10.8410
Swiss Franc 1.5100 1.5874 1.4836 1.4850
Canadian Dollar 1.5850 1.5594 1.5128 1.6998
Argentine Peso 5.2111 4.6443 5.4885 4.7924
Israeli Shekel 5.4756 5.2556 5.5134 5.3163
Turkish Lira 2.1631 1.9064 2.1547 2.1488
Indian Rupee 67.4271 63.7652 66.9539 67.5553
CRH 67