APC 2003 Annual Report Download - page 58

Business Review
56
8. Outlook for 2004
Schneider Electric continues to benefit from very
strong demand for its lineup in all the emerging
economies. In the rest of the world, growth plans
deployed as part of the NEW2004 program should
allow us to take full advantage of our markets’ grad-
ual recovery in 2004.
In this environment, we are pursuing an aggressive
growth strategy that involves:
■Expanding geographically and investing in high-
growth regions such as China, Eastern Europe, India
and Brazil.
■Maintaining powerful innovation capabilities with
an R&D investment representing 5.6% of sales.
■Extending and differentiating the lineup to optimize
the business portfolio.
■Developing positions in the Residential market as
strong as in the Building market with dedicated line-
ups.
To expand our accessible markets, we are focusing
on developing in strategically-related activities with
high potential. These new growth platforms include
building control and automation, secured power,
energy management systems and a number of spe-
cific segments.
Acquisitions since the end of 2002 (Digital
Electronics, TAC, Clipsal and MGE UPS Systems)
will add sales of € 1.3 billion over a full year, with cur-
rent average profitability of 11%. We intend to pursue
a rigorous strategy of targeted acquisitions in 2004.
We will also continue to deploy our efficiency plans,
which have significantly increased our operating
leverage since 2002. Thanks to our action plans, the
quality of our business model and our aggressive
growth strategy, we are particularly well positioned to
benefit from the global economic recovery and high
potential of our accessible markets.
Transition to International Financial
Reporting Standards IFRS
In compliance with EU regulation 1606/2002 issued
on July 19, 2002 and concerning the consolidated
financial statements of European companies whose
shares are traded on a regulated market, Schneider
Electric will apply International Financial Reporting
Standards IFRS as from January 1, 2005.
In application of IFRS 1 (First-time adoption of
International Financial Reporting Standards),
Schneider Electric will establish financial statements
for the year ending December 31, 2005 using IFRS
standards, along with comparatives with the 2004
financial statements using the same standards.
In 2003, the Company began identifying the areas
affected by the transition so as to be able to draw up
an opening balance sheet at January 1, 2004 and
establish IFRS financial statements for 2005.
Preparations for the transition break down into three
phases: 1) analyzing differences with existing stan-
dards and defining new reporting principles, 2) cal-
culating the impact on the opening balance sheet,
and 3) implementing the new standards in all units.
We are currently reviewing the differences with exist-
ing standards, identifying changes to be made in our
information systems and drafting new reporting prin-
ciples. This phase will be completed in the second
quarter of 2004. In the second phase, scheduled to
begin in the second quarter, we will make the neces-
sary calculations for the opening balance sheet, train
line and financial team members and modify our
information system. This work will be completed
before the end of the year.
The main items where changes are expected are
those for which French standards differ from IFRS.
These include the treatment of research and devel-
opment expenses (IAS standard 38), the recognition
and measurement of financial instruments (IAS 39),
employee benefits (IAS 19) and share-based pay-
ment (ED2). In keeping with the recommendations of
France’s
Commission des Opérations de Bourse /
Autorité des Marchés Financiers,
Schneider Electric
anticipated the measures of regulation CRC 2002-10
concerning impairment of goodwill in 2002, applying
a method that complies with IAS 36.