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Notes to the consolidated financial statements
24
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 euros. 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. The 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 used for its own use and equipment is 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 sheets 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
Exchange rates of principal currencies
(against 1 euro) 2004 2003
Balance Sheet Income Statement Balance Sheet Income Statement
year end rate average rate year end rate average rate
Australia (AUD) 1.7489 1.6904 1.6788 1.7402
Japan (JPY) 139.8300 134.4559 134.8500 131.0988
Brazil (BRL) 3.6206 3.6279 3.6439 3.5184
United Kingdom (GBP) 0.7071 0.6787 0.7070 0.6924
Switzerland (CHF) 1.5437 1.5660 1.5590 1.5211
USA (USD) 1.3640 1.2438 1.2610 1.1321