APC 2015 Annual Report Download - page 198

2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC196
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER31,2015
5NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.5 – Consolidation principles
Subsidiaries, over which the Group exercises exclusive control,
either directly or indirectly, are fully consolidated. Exclusive
control is control by all means, including ownership of a majority
voting interest, signifi cant minority ownership, and contracts or
agreements with other shareholders.
Group investments in entities controlled jointly with a limited number
of partners, such as joint ventures and alliances and companies
over which the Group has signifi cant infl uence (« associates »)
are accounted for by the equity consolidation method. Signifi cant
infl uence is presumed to exist when more than 20% of voting rights
are held by the Group.
Companies acquired or sold during the year are included in or
removed from the consolidated fi nancial statements as of the date
when effective control is acquired or relinquished.
Intra-group balances and transactions are eliminated.
The list of consolidated subsidiaries and associates can be found
in note32.
The reporting date for all companies included in the scope of
consolidation is December 31, with the exception of certain
associates accounted for by the equity method. For the latter
however, fi nancial statements up to September30 of the fi nancial
year have been used (maximum difference of three months in line
with the standards).
1.6 – Business combinations
Business combinations are accounted for using the acquisition
method, in accordance with IFRS 3 – Business Combinations.
Material acquisition costs are presented under « Other operating
income and expenses»in the statement of income.
All acquired assets, liabilities and contingent liabilities of the buyer
are recognized at their fair value at the acquisition date, the fair value
can be adjusted during a measurement period that can last for up
to 12months from the date of acquisition.
The excess of the cost of acquisition over the Group’s share in
the fair value of assets and liabilities at the date of acquisition is
recognized in goodwill. Where the cost of acquisition is lower than
the fair value of the identifi ed assets and liabilities acquired, the
negative goodwill is immediately recognized in the statement of
income.
Goodwill is not amortized, but tested for impairment at least
annually and whenever there is an indication that it may be impaired
(see note 1.11 below). Any impairment losses are recognized
under « Amortization and impairment of purchase accounting
intangibles».
1.7 – Translation of the financial statements
offoreign subsidiaries
The consolidated fi nancial statements are prepared in euros.
The fi nancial statements of subsidiaries that use another functional
currency are translated into euros as follows:
•assets and liabilities are translated at the offi cial closing rates;
•income statement and cash fl ow items are translated at weighted-
average annual exchange rates.
Gains or losses on translation are recorded in consolidated equity
under«Cumulative translation reserve ».
1.8 – Foreign currency transactions
Foreign currency transactions are recorded using the offi cial
exchange rate in effect at the date the transaction is recorded or the
hedging rate. At the balance sheet date, foreign currency payables
and receivables are translated into the functional currency at the
closing rates or the hedging rate. Gains or losses on translation
of foreign currency transactions are recorded under«Net fi nancial
income/(loss) ». Foreign currency hedging is described below, in
note1.23.
1.9 – Intangible assets
Intangible assets acquired separately or as part
ofabusiness combination
Intangible assets acquired separately are initially recognized in the
balance sheet at historical cost. They are subsequently measured
using the cost model, in accordance with IAS38– Intangible Assets.
Intangible assets (mainly trademarks and customer lists) acquired
as part of business combinations are recognized in the balance
sheet at fair value at the combination date, appraised externally
for the most signifi cant assets and internally for the rest, and that
represents its historical cost in consolidation. The valuations are
performed using generally accepted methods, based on future
infl ows. The assets are regularly tested for impairment.
Intangible assets are amortized on a straight-line basis over their
useful life or, alternatively, over the period of legal protection.
Amortized intangible assets are tested for impairment when there is
any indication that their recoverable amount may be less than their
carrying amount.
Amortization and impairment losses on intangible assets acquired
in a business combination are presented on a separate statement
of income line item, « Amortization and impairment of purchase
accounting intangibles».
Trademarks
Trademarks acquired as part of a business combination are not
amortized when they are considered to have an indefi nite life.
The criteria used to determine whether or not such trademarks
have indefi nite lives and, as the case may be, their lifespan, are as
follows:
•brand awareness;
•outlook for the brand in light of the Group’s strategy for integrating
the trademark into its existing portfolio.
Non-amortized trademarks are tested for impairment at least
annually and whenever there is an indication they may be impaired.
When necessary, an impairment loss is recorded.