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Foreign currency translation
The Group’s reporting currency is the Euro (€). Foreign currency is translated by the method
of functional currency. The functional currency for Group companies is always the national
currency, i.e. the prevailing currency in the environment where the enterprise carries on its
ordinary activities. In accordance with the method of functional currency, assets and liabilities
are translated at the closing rate on the balance sheet date and expenses and income
are
translated at the annual average rate in all financial statements of subsidiaries not
reporting in Euro. Any translation differences, including those arising in the process of
equity consolidation, are taken to shareholders’ equity without affecting earnings.
Accounting and valuation policies
Information on assets
Intangible assets
Intangible assets include Goodwill and other intangible assets such as exclusivity fees and
software purchased from others or developed in-house.
Goodwill represents the difference between the purchase price of subsidiaries and the
proportionate share of their net assets valued at the current value of all assets and liabilities
at the time of acquisition. Goodwill is recognised as an asset in the balance sheet.
Intangible assets are measured initially at cost and are recognised if it is probable that the
future economic benefits that are attributable to the asset will flow to the Group, and the
cost of the asset can be measured reliably. After initial recognition, intangible assets are
measured at cost less accumulated amortisation and any accumulated impairment losses.
Goodwill and other intangible assets are amortised using the straight-line method over
their estimated period of benefit, being 10 years for Goodwill and the estimated useful life
for Software, with a maximum of 5 years. Mondial Assistance Group periodically evaluates
the recoverability of Goodwill and takes into account events or circumstances that warrant
revised estimates of useful lives or that indicate the existence of an impairment.
Tangible assets
Tangible assets include property and other tangible assets such as equipment.
Property employed for its own use and equipment are stated at cost and depreciated using
the straight-line method over the shorter of the estimated life of the asset or the lease term.
Land is depreciated over 100 years, land and building combined over 50 years and other
tangible assets included under the heading “Other assets” over a period of their estimated
useful life at the date of purchase.
The Group recognises finance leases as assets and liabilities in the balance sheet at
amounts equal at the inception of the lease to the fair value of the leased property. Initial
direct costs incurred are included as part of the asset. Lease payments are apportioned
between the finance charge and the reduction of the outstanding liability. The finance charge
is allocated to periods during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
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Exchange rates of principal
currencies (against 1 Euro) 2003 2002
Balance sheet Income statement Balance sheet Income statement
year-end rate average rate year-end rate average rate
Australia (AUD) 1.6788 1.7402 1.8497 1.7389
Japan (JPY) 134.8500 131.0988 124.1900 118.1644
Brazil (BRL) 3.6439 3.5184 3.7112 2.8304
United Kingdom (GBP) 0.7070 0.6924 0.6502 0.6292
Switzerland (CHF) 1.5590 1.5211 1.4525 1.4670
USA (USD) 1.2610 1.1321 1.0415 0.9459