Sennheiser 2009 Annual Report Download - page 37

72 NOTE S ON CONS OLIDA TED F INAN C IAL STAT E MENT S 201 0 73
NOT ES O N CON S OLID ATED FINA N CIAL STA T EMEN T S 20 10
C. Principles of Consolidation
The accounting and valuation principles used throughout the Group correspond to those applied
in the annual financial statements of the parent company and to the consolidating accounting
standards laid down under commercial law (Section 308, subsections 1 and 2 HGB).
For the individual annual financial statements included in this report, the common balance
sheet date is December 31, 2010.
The individual annual financial statements denominated in foreign currencies were translated
in accordance with Section 308a HGB. With the exception of equity, items were converted at the
mean exchange rate. Equity, with the exception of the results for the year, is calculated using
historic exchange rates. Conversion of the profit and loss items is on the basis of weighted
average exchange rates. The currency conversion differences resulting from the conversion of
equity capital at historic exchange rates and the conversion of the Profit and Loss Statement at
average exchange rates are shown in the equity capital as not affecting the operating results.
Foreign exchange losses or gains contained in the individual financial statements included in
the consolidation are recognized as affecting the net income reported for the year.
The following rates of exchange were employed for the currency conversion of the individual
financial statements of foreign subsidiaries:
The average exchange rates were determined using weighted monthly average rates on the
basis of the Sennheiser Group’s turnover development. Here, the monthly average exchange
rates represent a monthly average based on the daily rates. This method was adopted in order
to approximate the transaction-related exchange rates within the Group as closely as possible.
Capital consolidation for company acquisitions on or before December 31, 2009, was based on
the book value method. If this capital consolidation leads to a positive gain, it is depreciated on
a linear basis over a useful life of four years. The negative difference from capital consolidation
was assigned to balance sheet profit.
Offsetting is undertaken on the basis of assigned values at the time of share purchase.
Receivables and payables involving the consolidated companies themselves are the subject of
set-off.
Internal sales and other internal income within the Group are offset against the corresponding
expenses.
Interim profits from finished goods and raw materials are charged against net income.
Interim profits relating to fixed assets are charged against net income.
D. Notes on the Consolidated Balance Sheet
Intangible assets are valued at acquisition cost and are subject to scheduled linear depreciation
over a useful life between three and six years. Goodwill is generally amortized over a period of
four years using the straight-line method. The valuation of tangible assets is based on
acquisition and/or production costs, subject to scheduled depreciation over a useful life of two
to 14 years for furniture and equipment as well as technical equipment and machinery, and
50 years for buildings. Movable fixed assets are always depreciated on a linear or declining
balance basis; depending on the useful life of the assets in question, a switch will be made to
the linear method when most appropriate.
For the companies in Germany, in keeping with tax regulation changes that took effect on
January 1, 2008, collective items were established for minor assets as defined by Section 6,
subsection 2a, of the German Income Tax Act (EStG). These collective items are written off at a
rate of 20% per year in the year of acquisition and in the subsequent four financial years.
In companies outside Germany, minor assets are written off in full in the year of acquisition and
are shown as disposals in the same year.
Interests in subsidiaries not fully consolidated and in associated companies are shown on the
assets side of the balance sheet at acquisition cost. Other loans are shown at acquisition cost.
Indemnity claims from life insurance concluded for the coverage of pension obligations are
recognized at fair value. Indemnity claims protected from the claims of all other creditors were
offset against the corresponding pension obligations.
Fixed assets are shown in the table on the next two pages.
CODE RATE OF EXCHANGE
Average for 2010
Foreign currency/€
End of year on Dec. 31, 2010
Foreign currency/€
01. US dollar USD 0.75226 0.74839
02. Canadian dollar CAD 0.73172 0.75064
03. Pound sterling GBP 1.16569 1.16178
04. Mexican peso MXN 0.05967 0.06043
05. Hong Kong dollar HKD 0.09686 0.09629
06. Danish krone DKK 0.13427 0.13417
07. Russian ruble RUB 0.02475 0.02450
08. Indian rupee INR 0.01649 0.01673
09. Japanese yen JPY 0.00862 0.00920
10. Chinese yuan CNY 0.11135 0.11335
11. Swiss franc CHF 0.72703 0.79974