LensCrafters 2011 Annual Report Download - page 186

ANNUAL REPORT 2011> 110 |
(b) income and expenses for each consolidated statement of income are translated at
average exchange rates (unless this 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
(c) all resulting exchange differences are recognized in other comprehensive income.
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 in translating foreign operations are reported in the Exchange
Rates Attachment to the Notes to the Consolidated Financial Statements.
CONSOLIDATION AREA
Please refer to note 4 “Business Combinations”, note 11 “Goodwill and Intangible assets -
net” and note 12 “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 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.