APC 2003 Annual Report Download - page 69

The accompanying notes are an integral part of the
consolidated financial statements.
Note 1 - Description of Business
Schneider Electric S.A., (the parent company or
"Schneider Electric") is a société anonyme organized
under the laws of France.
The parent company and its subsidiaries (the
"Group") is a leading manufacturer of products and
equipment for electrical distribution and for industrial
control and automation. The Group also provides
services related to these products, such as repair
and maintenance, and services related to system
reviews.
The Group is organized on a geographical basis
with three divisions (Europe, North America and
International).
Note 2 – Accounting Principles
2.1 - Basis of presentation
The consolidated financial statements of the Group
have been prepared in accordance with French
GAAP.
2.2 - Use of estimates
The preparation of financial statements requires
Group and subsidiary management to make esti-
mates and assumptions that are reflected in the
reported amounts of assets and liabilities, the disclo-
sure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of
revenues and expenses and commitments during the
reporting period. Actual results could differ from
those estimates.
2.3 - Consolidation principles
Companies over which the Group has direct or indi-
rect control of more than 50% of the outstanding vot-
ing shares or in which it exercises exclusive control
are fully consolidated. Exclusive control is control by
means other than ownership of a majority voting
interest (i.e., control by significant minority owner-
ship, by contracts or agreement with other share-
holders).
Companies over which the Group has significant
influence ("equity affiliates") are accounted for by the
equity method. A significant influence is presumed to
exist when more than 20% of outstanding voting
rights are held.
The proportional method of consolidation is used for
investments in jointly controlled operating entities,
such as joint ventures and alliances. For such enti-
ties, the Group records its proportional interest in the
entity’s balance sheet, income statement and cash
flows.
Companies acquired or sold during the year are
included in or removed from the consolidated finan-
cial statements as of the date of acquisition or sale.
Intercompany balances and transactions between
fully-consolidated companies are eliminated in con-
solidation. Intercompany balances and transactions
with proportionally-consolidated companies are elim-
inated based on the Group’s percent interest in the
companies concerned.
A list of significant consolidated subsidiaries is
included in Note 28. Certain non-significant sub-
sidiaries are not consolidated.
All of the companies included in the scope of consol-
idation end the fiscal year on December 31 except for
MGE Finances and VA Tech Schneider High Voltage
GmbH, whose fiscal years end on September 30.
However, any significant events in the three months
between September 30 and December 31 are taken
into account in the consolidated financial statements.
2.4 - Translation of the financial
statements of foreign subsidiaries
The financial statements of foreign subsidiaries are
translated into euros as follows:
1) Assets and liabilities are translated at official year-
end exchange rates.
2) Income statement amounts and cash flow items are
translated at weighted-average annual exchange rates.
3) Differences arising on translation are recorded as
part of the cumulative translation adjustment.
2.5 - Foreign currency transactions
Foreign currency transactions are recorded using the
official exchange rate in effect at the date the trans-
action is recorded or the hedging rate.
At year-end, foreign currency payables and receiv-
ables are translated into the reporting currency at
year-end exchange rates or the hedging rate. Gains
or losses on foreign currency conversion are record-
ed in the income statement.
67
5. Notes to the consolidated financial statements