APC 2011 Annual Report Download - page 165

1632011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC
CONSOLIDATED FINANCIAL STATEMENTS
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The perpetuity growth rate was 2%, unchanged on the previous
fi nancial year.
Impairment tests are performed at the level of the cash-generating
unit (CGU) to which the asset belongs. A cash-generating unit is
the smallest group of assets that generates cash infl ows that are
largely independent of the cash fl ows from other assets or groups of
assets. The cash-generating units in 2011 are Power, Infrastructure,
Industry, IT, Buildings and CST businesses. Power, Industry, IT
and Buildings businesses have operated as divisions since the
reorganisation on January 1, 2010. CST business was included
in 2011 within Industry business, of which it shared the same
characteristics, for presentation purpose. Infrastructure business
(previously named Energy), was created in 2011 in order to combine
all Medium Voltage activities including those from Areva Distribution,
as well as Telvent activities. Net assets were reallocated to the CGUs
at the lowest possible level on the basis of the business activities
to which they belong; the assets belonging to several activities
were allocated to each business (Power, infrastructure and Industry
mainly) pro-rata to their revenue in that business.
The WACC used to determine the value in use of each CGU was
8.1% for CST, 8.8 % for Industry, Power and IT 8.3% for Buildings
and 9.1 % for Infrastructure.
Goodwill is allocated when initially recognised. The CGU allocation
is done on the same basis as used by Group management to
monitor operations and assess synergies deriving from acquisitions.
Where the recoverable amount of an asset or CGU is lower than
its book value, an impairment loss is recognised. Where the
tested CGU comprises goodwill, any impairment losses are fi rstly
deducted therefrom.
1.11 – Non-current financial assets
Investments in non-consolidated companies are classifi ed as
available-for-sale fi nancial assets. They are initially recorded at their
cost of acquisition and subsequently measured at fair value, when
fair value can be reliably determined.
The fair value of equity instruments quoted in an active market
may be determined reliably and corresponds to the quoted price
at balance sheet date (Level 1 from the fair value hierarchy as per
IFRS7).
In cases where fair value cannot be reliably determined (Level 3
inputs), the equity instruments are measured at net cost of any
accumulated impairment losses. The recoverable amount is
determined with reference to the Group’s share in the entity’s net
assets along with its expected future profi tability and outlook. This
rule is applied in particular to unlisted equity instruments.
Changes in fair value are accumulated in equity under “Other
reserves” up to the date of sale, at which time they are recognised
in the income statement. Unrealised losses on assets that are
considered to be permanently impaired are recorded under
“Finance costs and other fi nancial income and expense, net”.
Loans, recorded under “Other non-current fi nancial assets”, are
carried at amortised cost and tested for impairment where there
is an indication that they may have been impaired. Long-term
fi nancial receivables are discounted when the impact of discounting
is considered signifi cant.
1.12 – Inventories and work in process
Inventories and work in process are stated at the lower of their
entry cost (acquisition cost or production cost generally determined
by the weighted average price method) or of their estimated net
realisable value.
Net realisable value corresponds to the estimated selling price net
of remaining expenses to complete and/or sell the products.
Inventory impairment losses are recognised in “Cost of sales”.
The cost of work in process, semi-fi nished and fi nished products,
includes the cost of materials and direct labor, subcontracting costs,
all production overheads based on normal capacity utilisation rates
and the portion of research and development costs related to the
production process (corresponding to the amortisation of capitalised
projects in production and product and range maintenance costs).
1.13 – Trade accounts receivable
Depreciations for doubtful accounts are recorded when it is
probable that receivables will not be collected and the amount of the
loss can be reasonably estimated. Doubtful accounts are identifi ed
and the related depreciations determined based on historical loss
experience, the age of the receivables and a detailed assessment of
the individual receivables along with the related credit risks. Once it
is known with certainty that a doubtful account will not be collected,
the doubtful account and the related depreciation are written off via
the statement of income.
Accounts receivable are discounted in cases where they due in over
one year and the impact of adjustment is signifi cant.
1.14 – Assets held for sale
Assets held for sale are no longer amortised or depreciated and
are recorded separately in the balance sheet under “Assets held for
sale” at the lower of amortised cost and net realisable value.
1.15 – Deferred taxes
Deferred taxes, corresponding to temporary differences between
the tax basis and reporting basis of consolidated assets and
liabilities, are recorded using the liability method. Deferred tax assets
are recognised when it is probable that they will be recovered at a
reasonably determinable date.
Future tax benefi ts arising from the utilisation of tax loss carryforwards
(including amounts available for carryforward without time limit)
are recognised only when they can reasonably be expected to
berealised.
Deferred tax assets and liabilities are not discounted. Deferred tax
assets and liabilities that concern the same unit and are expected
to reverse in the same period are netted off.