APC 2006 Annual Report Download - page 50

Contractual customer relationships are recognized in
certain business combinations, based on independent
valuations.
In accordance with IFRS, goodwill and non-amortiz-
able intangible assets recognized in business combi-
nations are tested half-yearly and yearly to ensure that
the recoverable amount is higher than the carrying
amount.
Property, plant and equipment
Land and buildings are tracked by the Property depart-
ment and stated at historical cost net of accumulated
depreciation and any accumulated impairment losses.
Manufacturing assets are tracked by the Globalization
& Industry department.
Property, plant and equipment are recognized in the
accounts on the basis of title deeds, an invoice or a
finance lease accompanied by documentary evidence
that the asset has been put into service.
Equity investments
Investments in consolidated companies and available-
for-sale financial assets are tracked and verified by the
Finance & Control – Legal Affairs Department.
Inventories
Inventories are verified at least once a year in each
subsidiary through physical inventories or cycle
counts. Inventories are written down to net realizable
value where appropriate.
Customers
When sales are recorded in the accounts by the sub-
sidiaries, this automatically generates an entry in a
trade receivables account. Receivables are valued and
– where appropriate – written down by the subsidiaries
in accordance with Group policies.
A credit management charter prepared by the Cus-
tomer Credit Department provides guidelines for new
customer acceptance, credit limits, credit insurance,
dunning and recovery procedures.
Tax assets and liabilities
The subsidiaries are responsible for calculating, accru-
ing and managing their taxes, except in those cases
where the subsidiary concerned is a member of a tax
group.
The Tax unit within the Finance & Control - Legal
Affairs Department reviews the current tax charge in
countries that represent a significant portion of the
Group’s total tax charge. The Tax unit is also responsi-
ble for overseeing the resolution of tax claims.
The Operating Divisions generally have their own tax
departments, which ensure compliance with local reg-
ulations.
The Statutory and Management Accounting unit with-
in the Finance & Control – Legal Affairs Department
reviews the Group’s current and deferred tax position
during each quarterly consolidation process. The pro-
cedure includes performing analytical reviews of the
main subsidiaries’ tax position, preparing the tax proof
validating the Group's effective tax rate, and analyzing
changes in deferred tax assets and liabilities by cate-
gory 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 &
Control - Legal Affairs Department. Provisions for con-
tingencies are adjusted to reflect any changes in the
estimated risk. Movements recorded by subsidiaries
are required to be evidenced and are checked for com-
pliance with the applicable accounting standards.
When necessary, the Group uses independent 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- and short-term debt
Net debt is managed at Group level by the Finance &
Control - Legal Affairs Department. Where appropriate,
cash pooling agreements and currency position man-
agement 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 & Control - Legal Affairs Depart-
ment. The bulk of their financing needs are met by
short-term intercompany loans in their functional cur-
rency, but in some cases the Corporate Treasury Cen-
ter may decide to obtain external financing. Long- term
debt is managed at Group level.
Bond issues are submitted to the Supervisory Board
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 guarantees are
issued by the Finance & Control – Legal Affairs
Department. A consolidated statement of off-balance
sheet commitments is produced at six-month intervals
by the Corporate Management Control and Account-
ing unit, which performs analytical reviews to check the
data. Other legal commitments are tracked by the
Legal Affairs unit.
Procedures for
the production of accounting
and financial information
Framework and accounting standards
The Group has prepared its financial statements in
accordance with International Financial Reporting
Standards (IFRS) since January 1, 2005.
The Group applies the IFRSs adopted by the Euro-
pean Union as of December 31, 2006.
The Group’s accounting principles reflect the underly-
ing assumptions and qualitative characteristics identi-
Corporate governance
48