Audi 2007 Annual Report Download - page 187

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Consolidation processes affecting income are subject to deferrals of income taxes, with
deferred tax assets and liabilities being offset where the term and tax creditor coincide.
The same accounting policies for determining the pro rata equity are applied to Audi
Group investments accounted for using the equity method. The last set of audited accounts
of the company in question serves as the basis for this purpose.
The currency of the Audi Group is the euro (EUR).
Foreign currency transactions in the separate financial statements of AUDI AG and its
subsidiaries are translated at the prevailing exchange rate on the date of the transaction.
Monetary items in foreign currency are reported as of the balance sheet date on the basis of
the exchange rate prevailing on that date. Exchange differences are recognized in the cur-
rent-period income statements of the respective Group companies.
The foreign companies belonging to the Audi Group are foreign entities which prepare
their financial statements in their local currency. The only exceptions are AUDI HUNGARIA
MOTOR Kft. and Audi Volkswagen Middle East FZE, which prepare their annual financial
statements in euros and U.S. dollars, respectively, rather than in local currency. The concept
of the “functional currency” is applied when translating financial statements prepared in
foreign currency. Assets and liabilities, with the exception of equity, are translated at the
closing rate. The effects of foreign currency translation on equity are reported in the cur-
rency exchange reserve with no effect on income. The items in the Income Statement are
translated using weighted average monthly rates. Currency translation variances arising
from the differing exchange rates used in the Balance Sheet and Income Statement are
recorded in equity, with no effect on income.
The development of the exchange rates serving as the basis for currency translation is
shown below:
1 EUR in units of foreign currency Dec. 31, 2007 Dec. 31, 2006 2007 2006
Closing rate Average rate
Australia AUD 1.6757 1.6691 1.6356 1.6667
Brazil BRL 2.6145 2.8152 2.6632 2.7336
Canada CAD 1.4449 1.5281 1.4690 1.4242
People’s Republic of China CNY 10.7524 10.2793 10.4186 10.0082
Japan JPY 164.9300 156.9300 161.2406 146.0624
South Korea KRW 1,377.9600 1,224.8100 1,273.3329 1,198.1480
United States USD 1.4721 1.3170 1.3706 1.2557
As all consolidated subsidiaries have their registered offices in countries in which there is
currently no hyperinflation, IAS 29 does not apply.
Recognition and measurement principles
Revenue, interest income and other operating income are always recorded as the services
are rendered or the goods or products are delivered, in other words upon passage of risk to
the customer.
Proceeds from the sale of vehicles for which buy-back agreements exist are not realized
immediately, but on a linear basis over the rental period, on the basis of the difference be-
tween the selling price and the anticipated buy-back price. These vehicles are reported un-
der inventories.
Currency translation
Recognition of income
and expenses