LensCrafters 2013 Annual Report Download - page 109

The current economic and financial crisis has resulted in the need to make assumptions on future trends that
are characterized by a significant degree of uncertainty and, therefore, the actual results in future years may
significantly differ from the estimate.
The most significant accounting principles which require a higher degree of judgment from management are
illustrated below.
(a) Valuation of receivables. Receivables from customers are adjusted by the related allowance for
doubtful accounts in order to take into account their recoverable amount. The determination of the amount of
write-downs requires judgment from management based on available documentation and information, as well as the
solvency of the customer, and based on past experience and historical trends;
(b) Valuation of inventories. Inventories which are obsolete and slow moving are periodically evaluated
and written down in the case that their recoverable amount is lower than their carrying amount. Write-downs are
calculated on the basis of management assumptions and estimates which are derived from experience and historical
results;
(c) Valuation of deferred tax assets. The valuation of deferred tax assets is based on forecasted results
which depend upon factors that could vary over time and could have significant effects on the valuation of deferred tax
assets;
(d) Income taxes. The Group is subject to different tax jurisdictions. The determination of tax liabilities
for the Group requires the use of assumptions with respect to transactions whose fiscal consequences are not yet certain
at the end of the reporting period. The Group recognizes liabilities which could result from future inspections by the
fiscal authorities on the basis of an estimate of the amounts expected to be paid to the taxation authorities. If the result
of the abovementioned inspections differs from that estimated by Group management, there could be significant effects
on both current and deferred taxes;
(e) Valuation of goodwill. Goodwill is subject to an annual impairment test. This calculation requires
management’s judgment based on information available within the Group and the market, as well as on past experience;
(f) Valuation of intangible assets with a definite useful life (trademarks and other intangible). The useful
lives of these intangible are assessed for appropriateness on a annual basis; and
(g) Benefit plans. The Group participates in benefit plans in various countries. The present value of
pension liabilities is determined using actuarial techniques and certain assumptions. These assumptions include the
discount rate, the expected return on plan assets, the rates of future compensation increases and rates relative to
mortality and resignations. Any change in the abovementioned assumptions could result in significant effects on the
employee benefit liabilities.
Earnings per share
The Company determines earnings per share and earnings per diluted share in accordance with IAS 33—
Earnings per Share. Basic earnings per share are calculated by dividing profit or loss attributable to ordinary equity
holders of the parent entity by the weighted average number of shares outstanding during the period. For the purpose of
calculating the diluted earnings per share, the Company adjusts the profit and loss attributable to ordinary equity
holders, and the weighted average number of shares outstanding, for the effect of all dilutive potential ordinary shares.
Treasury Shares
Treasury shares are recorded as a reduction of stockholders’ equity. The original cost of treasury shares, as
well as gains or losses on the purchase, sale or cancellation of treasury shares, are recorded in the consolidated
statement of changes in equity.