Porsche 2012 Annual Report Download - page 170

Financials
Notes to the consolidated fi nancial statements
or 7.7%) was used to discount cash flows. This was derived from a peer group for each equity
investment to reflect a return on capital that is appropriate for the risks involved in the respective
business operations. When selecting the two peer groups, the special aspects of the multi-
brand strategy pursued by the Volkswagen group (Volkswagen AG and its subsidiaries) as well
as of those of the sports car business of the Porsche Holding Stuttgart GmbH group were taken
into consideration. Even an isolated decrease in the sustainable EBIT margin by 20% or a
growth rate of 0%, or an isolated increase in the weighted average cost of capital by 20% would
not lead to an impairment of the carrying amounts of the investment in Volkswagen AG as of
31 December 2012.
Currency translation
Foreign currency items in the financial statements of the entities included in the consolidat-
ed financial statements by way of full consolidation or at equity are measured at the spot ex-
change rates on the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at the closing rate. Non-monetary
items denominated in a foreign currency measured at historical cost are translated using the
exchange rate on the date of the initial transaction. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rate prevailing on the date when the fair
value was determined. Exchange rate gains and losses as of the reporting date are recorded in
profit or loss.
Goodwill and adjustments to recognize assets and liabilities arising from business combina-
tions at their fair value are expressed in the functional currency of the subsidiaries.
Financial statements prepared in a foreign currency are translated to the euro in accordance
with IAS 21. The functional currency of the company included in consolidation is the currency of
the primary economic environment in which it operates.
Assets, liabilities and contingent liabilities are translated at the closing rate as of the report-
ing date, while equity is translated at historical rates with the exception of income and expenses
recognized directly in equity. The income statement is translated using average exchange rates.
Exchange rate differences resulting from the translation of financial statements are recognized
as a separate component directly in equity until the disposal of the subsidiary. Upon disposal
the separate item is reclassified to profit or loss.
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