Audi 2007 Annual Report Download - page 207

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The share capital of AUDI AG totals EUR 110,080,000.00. Each share represents a mathemati-
cal share of EUR 2.56 of the issued capital. It is classified into 43,000,000 no-par bearer
shares.
The capital reserves contain premiums paid in connection with the issuance of shares of
the Company. In the year under review, capital reserves rose to EUR 911 million as a result
of a contribution in the amount of EUR 428 million by Volkswagen AG to the capital reserve
of AUDI AG.
The opportunities and risks under foreign exchange contracts and currency option trans-
actions serving as hedges for future cash flows are deferred in the reserve for cash flow
hedges with no effect on the Income Statement. When the cash flow hedges become due,
the results from the settlement of the exchange-rate hedging contracts are reported in the
other operating income or expenses. Gains and losses from the measurement at fair value
of financial assets available for sale are recognized in the reserve for the market-price
measurement of securities. Upon disposal of the securities, share price gains and losses
realized are reported under the financial result.
Adjustments to actuarial assumptions on retirement benefit obligations are recognized
in the provisions for pensions and similar obligations.
Pursuant to IAS 28.39, foreign currency translation differences that do not affect income
from the accounting of FAW-Volkswagen Automotive Company, Ltd. using the equity
method were included in the reserve for equity method accounting after tax. The foreign
currency translation differences were reclassified from the currency exchange reserve to a
separate reserve item.
The minority interests in the Company’s equity relate to Volkswagen Group of America,
Inc., of Auburn Hills, U.S.A., and Volkswagen Canada Inc., of Ajax, Canada, which respec-
tively hold 100 percent of the shares of Audi of America, LLC and Audi Canada Inc. and to
which the earnings of the latter companies are attributable.
The balance of EUR 242 (487) million remaining after the transfer of profit to Volkswagen
AG is allocated to the other retained earnings.
Stock option plan
Under Volkswagen AG’s stock option plans, the members of the Board of Management and
selected senior managers of the Audi Group were granted the right to acquire stock options
for shares of Volkswagen AG by subscribing convertible bonds. In the 1999 to 2006 fiscal
years, a total of eight tranches of the stock option plan were issued. The stock option plan
was not extended for the period beyond 2006.
Each convertible bond is entitled to be converted into 10 ordinary shares. Conversion
may take place for the first time after a qualifying period of 24 months and then up until a
period of five years from the time of issuance of the convertible bond has elapsed. For de-
tails relating to the terms of subscription and exercise, please refer to the notes on equity in
the Annual Report of Volkswagen AG.
The convertible bonds are measured at fair value at the time of issue; in accordance with
the transitional provisions of IFRS 2, only convertible bonds granted after publication of the
draft standard on November 7, 2002, are affected. The fair value of the convertible bonds is
determined using a binomial option pricing model, and reported as personnel costs on a
pro rata basis over the 24-month qualifying period and under other changes in equity for
AUDI AG. Expenses of EUR 0.5 million were incurred in fiscal 2007. The corresponding ex-
pense for the previous fiscal year was EUR 0.6 million.