Merck 2008 Annual Report Download - page 93

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Leasing
Where assets are rented or leased and economic ownership lies with the Group com-
pany (finance lease), the asset is recorded at the lower of present value of the lease
payments and fair value in accordance with IAS 17 and depreciated over its useful
life. The corresponding payment obligations from future lease payments are recorded
as liabilities.
Marketable securities, investments and other financial assets
Marketable securities and financial assets are recorded in the balance sheet in
accordance with IAS 39. Marketable securities and non-current financial assets classi-
fied as available-for-sale are generally carried at fair value. Unrealized gains and
losses arising from changes in the fair value are recognized in equity. If the fair value
of a security or financial asset cannot be reliably determined, the asset is carried at
cost less any applicable write-downs. Held-to-maturity securities are generally mea-
sured at amortized cost.
Interests in companies over which Merck has significant influence but does not con-
trol are normally included using the equity method of accounting in accordance with
IAS 28 and are recognized at amounts corresponding to their net equity.
Non-interest-bearing or low-interest loans are carried at their present value. All
securities and financial assets are subject to an impairment test whenever there is an
indication that the asset may be impaired. The resulting write-downs are charged to
income. If the reasons for the impairment no longer exist, the impairment is reversed
and recognized as income. The carrying amount of the asset is increased to no more
than the amortized cost. Equity instruments held for sale are recognized in equity.
Deferred taxes
Deferred tax assets and liabilities result from temporary accounting differences in the
IFRS and tax accounts of Group companies as well as from consolidation measures. In
addition, deferred tax assets are recorded in particular for tax loss carryforwards if
and insofar as their utilization is probable in the foreseeable future. In accordance
with the liability method, the tax rates applicable or enacted as of balance sheet date
are used.
Liabilities
Liabilities are generally carried at their repayment amount in accordance with IAS 39.
Any differences arising between the amounts already paid and the amount payable at
final maturity are amortized. Liabilities in foreign currencies are translated at the
closing rates. Hedged items in foreign currency are likewise translated at the closing
rates in accordance with IAS 21.
88 | Merck Annual Report 2008