TomTom 2012 Annual Report Download - page 42

TomTom Annual Report and Accounts 2012
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Notes to the Consolidated Financial Statements | continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Group companies
For consolidation purposes, the assets and liabilities of entities that have a functional currency other than the group’s presentation currency
are translated at the closing rate at the date of the balance sheet, whereas the income statement is translated at the average exchange rate
for the period. Translation differences arising thereon are recognised in Other comprehensive income.
Cash fl ow statements
Cash fl ow statements are prepared using the indirect method. Cash fl ows from derivative instruments are classifi ed consistently with
the nature of the instrument.
Basis of consolidation
The consolidated fi nancial statements incorporate the fi nancial statements of the company and entities controlled by the company
(its subsidiaries). Control is achieved where the company has the power to govern the fi nancial and operating policies of an entity so
as to obtain benefi ts from its activities.
Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies in line with the group.
All inter-company transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.
Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is,
as transactions with the owners. The difference between fair value of any consideration paid and the relevant share acquired or
the carrying value of the net assets of the subsidiary is recorded in equity.
Associates
Associates are all entities over which the group has signifi cant infl uence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights, or other evidence of signifi cant infl uence. Investments in associates are accounted for using
the equity method of accounting, and are initially recognised at cost. The group’s investment in associates includes goodwill identifi ed
on acquisition, net of any accumulated impairment loss.
The group’s share of its associates’ post-acquisition profi ts or losses is recognised in the income statement, and its share of post-acquisition
movements in Other comprehensive income is recognised in Other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated
to the extent of the group’s interest in the associates. Unrealised losses are also eliminated, unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency
with the policies adopted by the group.
Revenue recognition
Revenue is measured as the fair value of the consideration received or receivable and represents amounts receivable for products
and / or services delivered in the normal course of business. Revenue is reduced for estimated customer returns, rebates and other similar
allowances whenever applicable based on historical data and expectations of future sales. For further details, refer to note 4, Critical
accounting estimates and judgements.
Sale of goods
Revenue on the sale of goods is only recognised when the risks and rewards of ownership of goods are transferred to the customers, which
include distributors, retailers, end-users and Original Equipment Manufacturers (OEMs). The risks and rewards of ownership are generally
transferred at the time the product is shipped and delivered to the customer and, depending on the delivery conditions, title and risk have
passed to the customer and acceptance of the product, when contractually required, has been obtained. In cases where contractual
acceptance is not required, revenue is recognised when management has established that all aforementioned conditions for revenue
recognition have been met.