Adidas 1996 Annual Report Download - page 45

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ADIDAS AG AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adidas AG, a German stock corporation, and its subsidiaries design, develop and market a broad range of athletic and
active lifestyle products, consisting of athletic footwear, apparel and accessories primarily under the tradename adidas
and also under the tradename erima. The Company’s headquarters are located in Herzogenaurach, Federal Republic
of Germany.
1. General The accompanying consolidated financial statements of adidas AG and its subsid-
iaries (collectively the “Company”) are prepared in accordance with accounting
principles generally accepted by the International Accounting Standards Committee
(“International Accounting Standards”) and comply with the Company’s significant
accounting policies described herein.
2. Summary of significant The consolidated financial statements are prepared in accordance with the con-
accounting policies solidation, accounting and valuation principles described below. As compared to
the previous year, these principles have been applied consistently in all material
respects.
Principles of consolidation:
The consolidated financial statements include the accounts of adidas AG and its
significant direct and indirect subsidiaries. The Company’s investments in other
companies are accounted for at cost. All significant intercompany transactions and
accounts are eliminated in consolidation.
Consolidation of equity is made in compliance with the book value method by off-
setting the initial investments in subsidiaries against the relevant equity portion held
by the parent company as at acquisition date.
A schedule of the shareholdings of adidas AG is shown in attachment I to these notes.
Goodwill and intangible assets:
Goodwill and intangible assets are valued at cost less accumulated amortization.
Goodwill resulting from the excess of the acquisition cost over the fair value of the
net assets of businesses acquired in purchase transactions and intangible assets
are amortized over their expected useful economic lives up to 20 years. Goodwill
and intangible asset amortization expense of DM 20 million, DM 17 million and
DM 11 million for the years ended December 31, 1996, 1995 and 1994, respectively
,
is included in depreciation and amortization.
Goodwill primarily relates to the Company’s acquisitions in the United States,
Australia/New Zealand and South Korea as described in Note 3.
45