LensCrafters 2015 Annual Report Download - page 185

Notes to the separate financial statements as of December 31, 2015 Page 5 of 77
1. ACCOUNTING POLICIES AND PRINCIPLES
The accounting policies and principles adopted are consistent with those used to prepare the consolidated financial
statements, to which reference should be made, except for the policies set out below:
Inventories. Inventories are stated at the lower of cost, determined using the average annual cost method for each
product, which approximates the weighted average cost, and net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary
to make the sale. The reserves to write down obsolete or slow-moving raw materials and finished goods are calculated
taking into account their expected future use and their net realizable value.
Investments in subsidiaries and associates. Investments in subsidiaries and associates are stated at cost, less any
impairment losses. Any positive difference arising on acquisition, between acquisition cost and the investor's share of
the net fair value of the investee's identifiable assets and liabilities, is therefore included in the carrying amount of the
investment.
Impairment. An investment incurs an impairment loss when its carrying amount exceeds the recoverable amount. The
carrying amount of investments are tested for impairment whenever there is internal or external evidence indicating that
this amount might be impaired, in accordance with IAS 36 - Impairment of Assets.
In particular, among the indicators used to assess investment impairment is whether the parent has booked a dividend
from the company and there is evidence that:
• the carrying amount of the investment in the separate financial statements exceeds the carrying amount of the
investee's net assets, including associated goodwill, reported in the consolidated financial statements;
or
• the dividend exceeds the total comprehensive income of the investee in the period the dividend is declared.
The recoverable amount is the higher of an asset's fair value, less costs to sell, and value in use.
The fair value is the price that would be received from the sale of an asset or that would be paid to transfer a liability in
an arm's length transaction between market participants at the transaction date.
The value in use is the present value of the future cash flows expected to be derived from an asset. In order to determine
value in use, estimated future cash flows are discounted to their present value using a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the asset is reduced to its
recoverable amount. An impairment loss is recognized immediately in the statement of income.