LensCrafters 2015 Annual Report Download - page 99

Notes to the consolidated financial statement as of December 31, 2015 Page 5 di 68
(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 2015, the composition of the Group changed due to the acquisition of the remaining 49% of Luxottica Nederland B.V.
(“Luxottica Netherlands).
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. The net realizable value represents the estimated sales
price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the
sale. Provisions for write-downs for raw materials, work in process and finished goods which are considered obsolete or slow
moving are computed taking into account their expected future utilization and their net realizable value. The Group also
considers other reasons that the cost of inventories may not be recoverable such as damage, declines in selling price, increased
costs of completion and increased costs to be incurred to make the sale. In addition when the Group performs its assessment of