APC 2004 Annual Report Download - page 115

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at December 31, 2004) or eliminated (10 million at
January 1, 2004 and 12 million at December 31,
2004).
No changes have been made to amortization periods.
Intangible assets acquired
in connection with business combinations
Under IFRS 3 -
Business Combinations, intangible
assets of the acquired company must be recognized
separately from goodwill where the assets concerned
qualify for recognition as intangible assets under IAS
38. These intangible assets are also recognized in the
French GAAP accounts and adoption of IFRS 3 does
not therefore result in any adjustment to the 2004
accounts.
2.3.2 - Goodwill
As explained above, the Group has decided not to
restate acquisitions made prior to January 1, 2004.
Goodwill arising on business combinations carried out
in 2004 and business combinations carried out in
2003 and still open at January 1, 2004 has been
reported in the French GAAP accounts in accordance
with IFRS 3 -
Business Combinations.
Goodwill is carried at net book value as of January 1,
2004 and is no longer amortized. At December 31,
2004, this change of method has a favorable impact of
217 million on 2004 income in the IFRS accounts,
and 209 million on the balance sheet after taking
into account foreign currency translation impacts.
Goodwill has also been restated by 176 million to
take into account deferred tax liabilities on brands pur-
chased in 2004.
French GAAP (standard CRC 2002-10) comply with
IAS 36 -
Impairment Of Assets, and goodwill has
been tested for impairment on the same basis in both
the French GAAP and the IFRS accounts.
2.3.3 - Inventory measurement
Inventory measurement has been reviewed in order to
take into account part of development costs.
The carrying value of inventories in the IFRS balance
sheet includes quality value engineering costs and
amortization of capitalized development costs.
This change of valuation method has the effect of
increasing the value of inventories by 36 million at
January 1, 2004 and by 40 million at December 31,
2004.
2.3.4 - Deferred taxes
In the French GAAP accounts, deferred taxes are rec-
ognized for all temporary differences between the
book value of assets and liabilities and their tax basis,
except for deferred taxes on non-amortizable intangi-
ble assets and that cannot be sold separately from the
acquired entity (§ 313 of standard CRC 99-02), corre-
sponding in practice to trademarks.
Consolidated financial statements
Under French GAAP deferred tax assets and liabilities
are discounted where significant and when reversals
can be reliably scheduled.
Application of IAS 12 -
Income Taxes, has the follow-
ing impacts:
Deferred tax liability is recognized on trademarks
purchased in connection with business combinations.
At January 1, 2004. the impact on equity is 17 mil-
lion. For 2004 business combinations, the impact is
176 million with corresponding increase in goodwill
(see 2.3-2 above).
Deferred taxes are not discounted, resulting in an
increase of 33 million in deferred tax liabilities at
January 1, 2004.
Deferred taxes are included in non-current assets and
liabilities in accordance with IAS 1 -
Presentation Of
Financial Statements,
which requires a distinction to
be made between current and non-current items.
The other adjustments to deferred taxes arise from
adjustments made in application of other standards.
They include:
Deferred tax liability recognized in respect of the
change in inventory valuation (13 million at January
1, 2004 and 14 million at December 31, 2004).
D eferred tax liability recognized in respect of
capi
talized development costs for 16 million at
December 31, 2004 (see note 2.3.1 above).
Deferred tax asset recognized in respect of the
additional obligation reported for defined benefit plans
(mainly actuarial gains and losses) in the IFRS bal-
ance sheet (see note 2.3.5 below): 274 million at
January 1, 2004 and 248 million at December 31,
2004.
Deferred tax assets and liabilities are offset when they
relate to the same taxable entity and are expected to
be settled in the same period.
2.3.5 - Employee benefits
Employee benefit obligations are identified and mea-
sured in the French GAAP accounts using methods
that are similar to those set out in IAS 19 -
Employee
Benefits.
These methods are described in the 2004
Annual Report (note 15 to the consolidated financial
statements).
In connection with the changeover to IFRS, the Group
has performed a comprehensive review of its obliga-
tions towards employees. Some plans, in particular
European retirement and healthcare plans, that were
previously qualified as defined contribution plans con-
stitute defined benefit plans under IAS 19 and have
therefore been requalified. In addition, as explained
above, unrecognized cumulative actuarial gains and
losses and past service costs have been recognized
as employee benefit liabilities by adjusting retained
earnings, as allowed under IFRS 1 -
First-Time
Adoption Of IFRS.
The total effect of these restate-
ments in the balance sheet is 735 million at January
1, 2004.