APC 2004 Annual Report Download - page 119

117
8
Auditors' Report on
the Consolidated Financial Statements
Free translation of the original report in French
Year ended December 31, 2004
To the Shareholders of Schneider Electric SA
In accordance with the terms of our appointment at
the Annual Shareholders' Meeting, we have audited
the accompanying consolidated financial statements
of Schneider Electric SA and its subsidiaries for the
year ended December 31, 2004.
These financial statements have been approved by
the Board of Directors. Our responsibility is to express
an opinion on the financial statements, based on our
audit.
Opinion on the
consolidated financial statements
We conducted our audit in accordance with the pro-
fessional standards applied in France. Those stan-
dards require that we plan and perform the audit to
obtain reasonable assurance about whether the con-
solidated financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also
includes assessing the accounting principles used
and significant estimates made by management, as
well as evaluating the overall financial statement pre-
sentation. We believe that our audit provides a rea-
sonable basis for our opinion.
In our opinion, the consolidated financial statements
give a true and fair view of the assets and liabilities
and financial position of Schneider Electric SA and its
subsidiaries as of December 31, 2004, and of the
results of their operations for the year then ended in
accordance with French generally accepted account-
ing principles and standards.
Without qualifying our opinion, we draw attention to
note 1.19 to the consolidated financial statements,
which describes a change in accrual method for vol-
ume discounts granted to distributors.
Basis of opinion
In accordance with Article L.225-235, paragraph 2, of
the Commercial Code requiring the auditors to explain
the basis of their opinion, we set out below informa-
tion used in formulating our audit opinion:
As explained in note 1.19 to the consolidated finan-
cial statements, in compliance with Emerging Issues
Task Force recommendation 2004-E concerning
recognition of discounts and non-cash benefits, your
Company reviewed its practices and harmonized its
methods for accruing volume discounts granted to
distributors. The note states that the change in accru-
al method led to the recognition of an additional
accrual for discounts in an amount of 20 million net
of tax.
In our assessment of the accounting rules and guide-
lines applied by your Company, we obtained assur-
ance on the substance of the change in accounting
method and the manner in which it was presented.
As explained in note 12 to the consolidated financial
statements, deferred tax assets recognized in the bal-
ance sheet at December 31, 2004 include 439.6
million corresponding to tax loss carryforwards. The
note also states that your Company expects to recov-
er these deferred tax assets within six to ten years but
cannot reliably forecast the periods in which the tax
loss carryforwards will be used. As a result, deferred
taxes are not discounted.
We obtained assurance about the reasonableness of
the assumptions used to produce the estimates of
future taxable income used to support assessments of
the recoverability of these deferred tax assets.
As explained in notes 1.6 and 1.10 to the consoli-
dated financial statements, goodwill is tested for
impairment when factors exist indicating that the relat-
ed assets may have suffered a loss of value. We
reviewed, on a test basis, the indicators of a loss of
value and the other information evidencing the
absence of any loss of value.
Note 24 to the consolidated financial statements
states that the cost of restructuring programs
launched by Group units in 2004 amounted to 88
million. These costs concern restructuring measures
initiated or announced before December 31, 2004, for
which provisions have been recorded based on an
estimate of the costs to be incurred. We reviewed the
approach used by the Group, based on currently
available information.
As part of our review of the financial statements taken
as a whole, our assessment of these accounting esti-
mates was included in formulating our audit opinion,
provided above.
Specific procedures
We also reviewed the information about the Group
given in the report of the Board of Directors in accor-
dance with French generally accepted accounting
principles and standards. We have no matters to
report concerning the fairness of this information and
its consistency with the consolidated financial state-
ments.
Paris and Neuilly-sur-Seine, February 17, 2005
The Statutory Auditors
Mazars & Guérard / Barbier Frinault et Autres /
Mazars Ernst & Young
Pierre Sardet Christian Chochon
Jean-Louis Simon Pierre Jouanne
Consolidated financial statements