LensCrafters 2013 Annual Report Download - page 102

(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 the results of foreign operations are reported in the Exchange Rates
Attachment to the Notes to the Consolidated Financial Statements.
COMPOSITION OF THE GROUP
During 2013, the composition of the Group changed due to the acquisition of Alain Mikli International SA
(“Alain Mikli”).
On March 25, 2013, the Group subscribed to shares as part of a capital injection corresponding to a 36.33%
equity stake in the Italian optical retailer Samoiraghi & Viganò. The price paid for the investment, which is accounted
for using the equity method, was Euro 45 million.
Please refer to Note 4 “Business Combinations,” and Note 11 “Goodwill and Intangible assets” for a
description of the primary changes to the composition of the Group.
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, which approximates the weighted average cost, 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.
Property, plant and equipment
Property, plant and equipment are measured at historical cost. Historical cost includes expenditures that are
directly attributable to the acquisition of the items. After initial recognition, property, plant and equipment is carried at
cost less accumulated depreciation and any accumulated impairment loss. The depreciable amount of the items of
property, plant and equipment, measured as the difference between their cost and their residual value, is allocated on a
straight-line basis over their estimated useful lives as follows: