LensCrafters 2010 Annual Report Download - page 127

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NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
income and expenses for each consolidated statement of income are translated at average exchange rates (unless this (b)
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and
all resulting exchange differences are recognized in other comprehensive income. (c)
Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate.
The exchange rates used to translate foreign operations are reported within the Attachment to the notes to the
consolidated financial statements.
CONSOLIDATION AREA
During 2010, there were no significant changes to the consolidation area. Please refer to note 10 “Goodwill and other
intangible assets – net” and note 11 “investments” for the main changes in the consolidation area.
SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short–term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Investments
qualify as cash equivalents only when they have a maturity of three months or less from the date of the acquisition.
Accounts receivable and other receivables
Accounts receivable and other receivables are carried at amortized cost. Losses on receivables are measured as the
difference between the receivables’ carrying amount and the present value of estimated future cash flows discounted
at the receivables’ original effective interest rate computed at the time of initial recognition. The carrying amount of the
receivables is reduced through an allowance for doubtful accounts. The amount of the losses on written–off accounts is
recorded in the consolidated statement of income within selling expenses.
Subsequent collections of previously written–off receivables are recorded in the consolidated statement of income as a
reduction of selling expenses.
Inventories
Inventories are stated at the lower of the cost determined by using the method of the average annual cost method by
product line and the net realizable value. Provisions for write–downs for raw materials and finished goods which are
considered obsolete or slow moving are computed taking into account their expected future utilization and their realizable
value. The realizable value represents the estimated sales price, net of estimated sales and distribution costs.