Adidas 1998 Annual Report Download - page 48

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46 Notes to Consolidated Financial Statements
INCOME TAXES:
Current income taxes are computed in accordance with the rules for taxation estab-
lished in the countries in which the Company operates.
The Company computes deferred taxes for all temporary differences between the
carrying amount and the tax basis of its assets and liabilities and tax loss carryforwards.
Deferred tax assets arising from deductible differences and tax loss carryforwards
which exceed taxable differences are only recognized to the extent that it is probable
that the company concerned will generate sufficient taxable income in order to realize
the associated benefit.
EARNINGS PER SHARE:
Earnings per share are calculated in accordance with IAS 33. The Company does
not have any securities or other contracts outstanding which might result in a dilution
of earnings per share.
DERIVATIVE FINANCIAL INSTRUMENTS:
Exchange gains and losses on outstanding forward currency contracts and currency
options which hedge anticipated future transactions are deferred and recognized in income
when the underlying transaction takes place whereas exchange gains and losses
on
forward contracts and currency options which are discontinued or no longer serve as a
hedge for an anticipated future transaction are charged to current income as incurred.
Interest-rate cap premiums are amortized over the lifetime of the caps. Amortized
cap premiums are included in interest expenses, as part of the financial result.
USE OF ESTIMATES:
The preparation of financial statements in conformity with IAS requires management
to make assumptions and estimates that affect reported amounts and related disclosures.
Actual results could differ from those estimates.
3. ACQUISITIONS/ Effective October 1, 1997 adidas assumed full ownership over its former joint venture
FOUNDING OF adidas Benelux, Netherlands and its fully-owned subsidiary adidas Belgium through the
SUBSIDIARIES acquisition of the remaining interest. The purchase price totaled DM 65 million. The pur-
chase costs in excess of the proportionate shares of the acquired net assets of DM 55
million were allocated to goodwill.
Effective December 22, 1997 the Company acquired 100% of the former Salomon
family holding company, Sport Développement S.C.A. (now adidas Salomon France S.A.)
which owned 38.87% of the shares and 56.12% of the voting rights of Salomon S.A.,
Annecy (France). The aggregate purchase price for these shares was DM 942 million
and was accounted for at cost under investments in 1997 (see note 10).
After the closing of the purchase of the family holding company, and with the approval
of the French authorities, adidas Salomon France S.A. launched in January 1998 a
simplified public tender offer for all outstanding shares of Salomon S.A., a publicly traded
company admitted to the official market of the Paris Stock Exchange. The offer price of
FRF 521.50 in the tender offer was the same as the implied price per Salomon share paid
to the shareholders of the family holding company. After the closing of this tender offer
in February 1998 the Company had acquired over 95% of the shares of Salomon S.A.