APC 2005 Annual Report Download - page 75

73
5
Notes to
the Consolidated Financial
Statements
All amounts in millions of euros unless otherwise
indicated.
The accompanying notes are an integral part of the
consolidated financial statements.
The consolidated financial statements for the year
ended December 31, 2005 were reviewed by the Board
of Directors of Schneider Electric on February 15, 2006.
They will be submitted to shareholders for approval at
the Annual General Meeting of May 3, 2006.
The Group’s main businesses are described in the
Business Presentation chapter of the Annual Report.
Note 1 - Summary of
significant accounting policies
1.1 - Accounting standards
In accordance with EU regulations 1606/2002 and
1725/2003, Schneider Electric’s consolidated financial
statements have been prepared in compliance with
the international accounting standards endorsed by
the European Union as of December 31, 2005. These
include International Financial Reporting Standards
(IFRSs), International Accounting Standards (IASs)
and the related interpretations issued by the Stan-
dards Interpretations Committee (SIC) and the Inter-
national Financial Reporting Interpretations Commit-
tee (IFRIC). The accounting policies and methods
used are described below.
The opening balance sheet at January 1, 2004 has
been restated in accordance with IFRS 1 – First-Time
Adoption Of IFRS
– based on the standards and inter-
pretations applicable as of December 31, 2005. In
keeping with the recommendations of the French secu-
rities regulator (AMF) during the transition period, the
options used in first time adoption at January 1, 2004
were presented in the 2004 Annual Report, along with
a description of the changes in accounting policies and
methods and their impact on the opening and closing
balance sheets and the statement of income for the
year ended December 31, 2004. This information is
presented in note 29 of the present report.
I
AS 32 – Financial Instruments: Disclosure and Presen-
tation
– and IAS 39 – Financial Instruments: Recogni-
tion a
nd Measurement – have been applied as from
January 1, 2005. The data for 2004 has not been
restated, as allowed under IFRS 1. The impact of this
change in accounting method, described in note 2, has
been recognized in opening equity at January 1, 2005.
Because the 2004 figures have been not been restat-
ed, data for the 2004 financial year is not comparable.
However, the impact on profit for the year ended
December 31, 2005 is not material (see note 26).
The Group has opted for early application of the
amendment to IAS 19 –
Employee Benefits – con-
cerning actuarial gains and losses (as of January 1,
2004), and of the amendments to IAS 39 –
Financial
Instruments: Recognition and Measurement
– con-
cerning cash flow hedges of forecast intragroup trans-
actions and the fair value option (as of January 1,
2005). It decided against early application of the
amendment to IAS 1 –
Capital Disclosures – and of
IFRS 7 – Financial Instruments: Disclosures – which
will be mandatory as of January 1, 2007. Early appli-
cation of IFRIC interpretation 6 –
Liabilities arising
from participating in a specific market
– and IFRIC
interpretation 4 – Determining whether an arrange-
ment contains a lease
– did not have any impact on
the Group’s financial statements.
To facilitate comparison, the financial statements
present data prepared in accordance with IFRS for the
past two years. For a three-year comparison, the
French GAAP financial statements for 2003 and 2004
are presented in note 31. Commentary on the 2003
financial year is included in the 2004 and 2003 Annu-
al Reports registered by the French securities regula-
tor (AMF) under numbers D05-0309 and D04-0322
respectively.
1.2 - Basis of presentation
The financial statements have been prepared on a
historical cost basis, with the exception of derivatives
and available-for-sale financial assets, which are
measured at fair value. Financial liabilities are meas-
ured using the cost model. The carrying amount of
hedged assets and liabilities and the related hedging
instruments corresponds to their fair value.
1.3 - Use of estimates
The preparation of financial statements requires
Group and subsidiary management to make esti-
mates and assumptions that are reflected in the
reported amounts of assets and liabilities at the date
of the financial statements, revenues and expenses
for the reporting period and related disclosures. Actu-
al results could differ from those estimates.
These estimates mainly concern:
The recoverable amount of assets (described in
note 1.10).
Pension and other post-employment benefit obliga-
tions (described in note 15).
1.4 - Consolidation principles
Companies over which the Group exercises exclusive
control, either directly or indirectly, are fully consolidat-
ed. Exclusive control is control by all means, including
ownership of a majority voting interest, significant
minority ownership, and contracts or agreements with
other shareholders.
Investments in operating entities controlled jointly with
a limited number of partners, such as joint ventures
and alliances, are accounted for by the equity method
in accordance with the alternative treatment allowed
under IAS 31 –
Interests in Joint Ventures .
Companies over which the Group has significant influ-
ence ("associates") are accounted for by the equity
method. Significant influence is presumed to exist when
more than 20% of outstanding voting rights are held.
Consolidated Financial Statements