APC 2005 Annual Report Download - page 127

125
Consolidated Financial Statements
6
Auditors' Report on
the Consolidated Financial Statements
Free translation of the original report in French
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, 2005.
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. For the first time, the financial statements have
been prepared in accordance with the International
Financial Reporting Standards (IFRSs) endorsed by
the European Union. To facilitate comparison, the 2004
data has been adjusted for IFRS, with the exception of
IAS 32 –
Financial Instruments: Disclosure and Presen-
tation
– and IAS 39 – Financial Instruments: Recogni-
tion and Measurement,
which have been applied as
from January 1, 2005, in accordance with the option
provided by IFRS 1 –
First Time Adoption of IFRS .
I - 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 mis-
statement. 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 pres-
entation. We believe that our audit provides a reason-
able 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 the
individuals and units included in the scope of consoli-
dation as of December 31, 2005, and of the results of
their operations for the year then ended in accordance
with the International Financial Reporting Standards
endorsed by the European Union.
II - Basis of opinion
In accordance with Article L.823-9 of the Commercial
Code requiring the auditors to explain the basis of
their opinion, we set out below information used in for-
mulating our audit opinion:
Note 1.8 to the consolidated financial statements
explains the method for recognizing research and
development costs and describes the criteria under
which development costs may be capitalized. We
reviewed the data and assumptions used to identify
development projects that qualify for capitalization, as
well as the Group’s calculations, and obtained assur-
ance that adequate disclosure is made in the notes to
the consolidated financial statements.
As explained in note 1.10 to the consolidated finan-
cial statements, intangible assets and goodwill are test-
ed for impairment at least once a year and when factors
exist indicating that the related assets may have suf-
fered 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.
As explained in note 1.21 to the consolidated finan-
cial statements, commitments to buy out minority
shareholders have been recognized in debt in an
amount corresponding to the purchase price of the
minority interest. In the absence of established
accounting practice, the difference between the pur-
chase price of the minority interests and the share in
the acquired net assets has been posted to goodwill
without remeasuring the acquired assets and liabili-
ties. We verified the estimates used in recognizing the
additional goodwill and debt corresponding to the
commitment and obtained assurance that the option
selected by the Group is adequately disclosed in the
notes to the consolidated financial statements.
As indicated in notes 1.14 and 12.3 to the consolidat-
ed financial statements, future tax benefits arising from
the utilization of tax loss carryforwards are recognized
only when they can reasonably be expected to be real-
ized.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.
Notes 1.17 and 15 describe the method for valuing
pensions and other post-employment obligations.
Actuarial valuations were performed for these commit-
ments. We reviewed the data and assumptions used
and calculations made, and obtained assurance that
adequate disclosure is made in the notes to the con-
solidated financial statements.
Note 25 ("Other operating income/expense") states
the amount of restructuring costs recorded in 2005.
We verified that, based on currently available informa-
tion, these costs concern restructuring measures initi-
ated or announced before December 31, 2005, for
which provisions have been recorded based on an
estimate of the costs to be incurred. We also reviewed
the data and assumptions used by the Group to make
these estimates.
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.
III – Specific procedures
We also reviewed the information about the Group
given in the report of the Board of Directors in accor-
dance with professional standards applied in France.
We have no matters to report concerning the fairness
of this information and its consistency with the consol-
idated financial statements.
Paris and Neuilly Sur Seine, February 16, 2006
The Statutory Auditors
Mazars & Guérard Barbier Frinault & Autres
Mazars Ernst & Young
Pierre Sardet Christian Chochon
Jean-Louis Simon Pierre Jouanne