APC 2005 Annual Report Download - page 82

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2.3 - Derivative instruments and
hedge accounting
IAS 39 requires all derivative instruments to be recog-
nized in the balance sheet and measured at fair value,
whereas in the French GAAP accounts, these instru-
ments were generally carried off-balance sheet. The
treatment of gains and losses arising from remeasure-
ment at fair value depends on whether or not the
instruments qualify for hedge accounting under IAS 39.
Currency instruments qualified as cash flow hedges
under IAS 39 have been recognized in the balance
sheet under "Other receivables" at their fair value of
12.2 million, leading to an adjustment of equity in the
same amount, recorded under "Other reserves".
Hedges of future metal purchases qualified as cash
flow hedges under IAS 39 have been recognized in
the balance sheet under "Other receivables" at their
fair value of 7.7 million, leading to an adjustment of
equity in the same amount, recorded under "Other
reserves".
2.4 - Derivative instruments
not qualifying for hedge accounting
Derivative instruments not qualifying for hedge
accounting under IAS 39 have been recognized at fair
value in the balance sheet, in assets for 1.8 million
and in liabilities for 3.3 million, leading to correspon-
ding adjustments to equity. The instruments con-
cerned consist mainly of interest rate hedges on intra-
group debt.
2.5 - Perpetual bonds
In the French GAAP accounts, the 1991 perpetual
bonds are recorded in debt at their nominal value,
while the related interest rate swaps are carried off-
balance sheet.
In accordance with interpretation SIC 12 and IAS 39,
the Group has consolidated the special purpose enti-
ty that holds the perpetual bonds. The swaps taken out
by the special purpose entity in connection with the
perpetual bonds have been measured at fair value.
Interest rate swaps on the perpetual bonds taken out
directly by the Group, which do not qualify for hedge
accounting, are recognized in the balance sheet at fair
value, with gains and losses arising from remeasure-
ment at fair value recognized in "Other financial
income and expense".
At January 1, 2005, the value of the perpetual bonds
and the fair value of the swaps taken out by the spe-
cial purpose entity was 21 million, and the fair value
of the swaps entered into directly by the Group was
56.4 million.
2.6 - Put options
granted to minority shareholders
The Group has given commitments to buy out the
minority shareholders of consolidated subsidiaries
(put options). These commitments were reported off-
balance sheet in the French GAAP accounts at
December 31, 2004.
IAS 32 requires their recognition in debt, at fair value,
which corresponds to the option strike price. As
explained in note 1.21, in the absence of established
accounting practice and pending publication of an
interpretation by the IFRIC specifying the accounting
treatment of the related adjustment, the difference
between the fair value of the put options and the under-
lying minority interests has been posted to goodwill.
Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2003
(Number of companies) France International France International France International
Parent company and fully consolidated subsidiaries 69 366 65 328 52 266
Proportionally consolidated companies - - - - 1 1
Companies accounted for by the equity method 1 3 2 5 2 7
Sub-total by region 70 369 67 333 55 274
Total 439 400 329
Acquisitions
On April 14, 2005, Schneider Electric acquired all out-
standing shares in Canada’s Power Measurement Inc.,
a leader in the design, production and marketing of
energy management systems. Power Measurement
Inc. has been fully consolidated since April 14, 2005.
On May 30, 2005, Schneider Electric acquired 50.9% of
the outstanding shares of ELAU Administration GmbH,
thereby raising its interest from 41.9% to 100%.
ELAU was accounted for by the equity method until
May 31, 2005 and has been fully consolidated since
June 1, 2005.
Note 3 - Changes in the scope of consolidation
3.1 - Additions and removals
The consolidated financial statements for the year ended December 31, 2005 include the accounts of the com-
panies listed in note 30. The scope of consolidation at December 31, 2005, 2004 and 2003 is summarized as
follows: