APC 2005 Annual Report Download - page 131

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129
3
Notes to the Financial Statements
of Schneider Electric SA
(All amounts in thousands of euros
unless otherwise specified)
Significant events of the year
Schneider Electric SA issued bonds worth 1.5 billion
in two tranches, due 2010 and 2017.
During the year, the Company bought back Schneider
Electric SA shares in an amount of 161.0 million. It
also acquired ELAU and six companies comprising
Invensys’ Advanced Building Systems business in
Europe and the Middle East for a total of 141.8 mil-
lion.
Accounting principles
The financial statements for the year ended December
31, 2005 have been prepared in accordance with the
1999
Plan Comptable Général
and French generally
accepted accounting principles.
Non-current assets
Non-current assets are stated at cost.
Intangible assets
Intangible rights are amortized over a maximum of five
years.
Property, plant and equipment
Property, plant and equipment are depreciated by the
straight-line method over their estimated useful lives,
ranging from 3 to 10 years.
Shares in subsidiaries and affiliates
Shares in subsidiaries and affiliates are stated at cost.
Allowances for impairment in value are recorded if the
carrying value is higher than the estimated value in use
at the end of the financial year. Value in use is esti-
mated primarily on the basis of underlying net assets,
Company Financial Statements
earnings outlook and economic forecasts. For recently-
acquired investments, account is also taken of the
acquired business goodwill. For listed investments,
value in use is also based on the average stock price
over the last month. Unrealized gains on investments
are not recognized.
Treasury stock
Treasury stock is stated at cost. The unit cost of treas-
ury stock removed from the portfolio is calculated
according to the average weighted cost method. In the
case of treasury stock held for allocation on the exer-
cise of stock options, a provision is recorded if the
exercise price is lower than the carrying value of the
related treasury shares.
Pension obligations
The present value of pension obligations is deter-
mined using the projected unit credit method. Supple-
mentary pension benefits are accrued for based on
the contractual terms of top-hat agreements.
The Company applies the corridor method to actuarial
gains and losses arising from changes in estimates.
Under this method, the portion of net cumulative actu-
arial gains and losses that exceeds 10% of the project-
ed benefit obligation is gradually amortized. The appli-
cation of these rules for valuing pension obligations as
from 2005 constitutes a change in accounting method
with the sole purpose of providing more accurate infor-
mation.
Currency risk
Unrealized exchange losses are reserved for when
necessary. Where unrealized exchange gains and
losses exist on investments and the related financing
in the same currency and with the same maturity, the
amount of the reserve is limited to the net loss.
Bonds
Call premiums and issue costs are amortized over the
life of the bonds.
Dec. 31, 2004 Additions Disposals Dec. 31, 2005
Cost 5,670 2 (309) 5,363
Depreciation (791) (7) 82 (716)
Net 4,879 (5) (227) 4,647
Note 1 – Non-current assets
1a) Intangible assets
This item primarily comprises share issue and merger expenses, which are fully amortized.
1b) Property, plant and equipment