APC 2005 Annual Report Download - page 46

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The Operating Divisions generally have their own tax
departments, which ensure compliance with local reg-
ulations.
The Corporate Management Control and Accounting
unit within the Finance and Control - Legal Affairs
Department performs six-month reviews of the
Group's current and deferred tax position, preparing
the tax proof validating the Group’s effective tax rate,
and analyzing changes in deferred tax assets and lia-
bilities by category of tax basis.
Provisions for contingencies
Group policy consists of recording provisions for con-
tingencies and charges in the accounts of the individ-
ual subsidiaries. Claims and litigation are generally
managed jointly by the subsidiary and the Finance
and Control - Legal Affairs Department. Provisions for
contingencies are adjusted to reflect any changes in
the estimated risk. Movements recorded by sub-
sidiaries are required to be evidenced and are
checked for compliance with the applicable account-
ing standards. When necessary, the Group uses inde-
pendent experts to assess risks.
Employee benefits
The subsidiaries are responsible for managing their
employee benefit obligations under compulsory and
company-sponsored plans. Group policy consists of
systematically recording provisions for statutory
length-of-service awards due to employees on retire-
ment, pensions and healthcare costs paid on behalf of
retired employees in all countries where the Group
has an obligation under the related plans.
Long-term debt
Net debt is managed at Group level by the Finance
and Control - Legal Affairs Department. Where appro-
priate, cash pooling agreements and currency position
management agreements are set up to profit from
economies of scale and minimize financing costs.
Decisions concerning the financing of subsidiaries are
made by the Finance and Control - Legal Affairs
Department. The bulk of their financing needs are met
by short-term intercompany loans in their local curren-
cy, but in some cases the Corporate Treasury Center
may decide to obtain external financing. Long-term
debt is managed at Group level.
Bond issues are submitted to the Board of Directors
for approval.
Off-balance sheet commitments
The off-balance sheet commitments of newly-
acquired subsidiaries are reviewed and analyzed
when the company joins the Group. Financial guaran-
tees are issued by the Finance and Control - Legal
Affairs Department. A consolidated statement of off-
balance sheet commitments is produced at six-month
intervals by the Corporate Management Control and
Accounting department, which performs analytical
reviews to check the data. Other legal commitments
are tracked by the Legal Affairs unit.
Procedures for the preparation
of accounting and financial information
Conceptual framework,
database and accounting standards
Since January 1, 2005, the Group has prepared its
financial statements in accordance with International
Financial Reporting Standards (IFRS) endorsed by
the European Union as of December 31, 2005. In
accordance with IFRS 1 –
First-time adoption of IFRS
– a reconciliation of the 2004 French GAAP accounts
to the 2004 IFRS accounts appears in the notes to the
annual financial statements.
The Group’s accounting principles reflect the underly-
ing assumptions and qualitative characteristics identi-
fied in the IFRS accounting framework. This involves
preparing the financial statements on the accrual
basis of accounting and assuming that the business is
a going concern. Qualitative characteristics include
understandability, relevance, reliability and compara-
bility. These characteristics rely on information that is
neutral, prudent and complete and that represents
transactions and events in accordance with their sub-
stance and economic reality and not merely their legal
form.
The management reporting and consolidation pack-
ages of all Group entities are prepared strictly in
accordance with Group accounting principles and
policies.
The accounting and reporting system
The Corporate Management Control and Accounting
Department of the Finance & Control - Legal Affairs
Department has launched a project to standardize
management reporting processes among the various
subsidiaries by rolling out an integrated SAP system
across the entire Group. Subsidiaries in France,
Spain, certain other European countries and China
have already migrated their statutory and manage-
ment accounting systems to SAP. A SAP core model
for use by all Group entities is currently being devel-
oped and will be implemented in phases between
2007 and 2009.
The accounts of the subsidiaries are prepared in
accordance with Group accounting policies. The data
is then adjusted, where necessary, to produce the
local statutory and tax accounts.
Consolidation and reporting software is used to report
monthly actual and forecast data and also to produce
the Group financial statements.
A new reporting and consolidation system was
deployed on January 1, 2006 that has redefined the
way reporting is organized (units, indicators, reporting
deadlines) and management and statutory accounting
processes.
All Group management and statutory reporting manu-
als have been revised and a comprehensive user
training plan has been implemented covering the new
system and the Group’s management and statutory
accounting policies.