Adidas 2001 Annual Report Download - page 70

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65
Consolidated Accounts
a) Framework for Accounting Policies in Accordance with IAS
The accounting policies of entities in accordance with International
Accounting Standards (IAS) are based on the objective of providing in-
vestors with decision-relevant information. It is thus not possible to show
lower profits for the protection of creditors or influence results by using
tax-based values (requirement for income and expenses to be recorded
in the commercial financial statements in order to be accepted for tax
purposes).
Based on the assumption that decision-relevant information should be
provided to investors, it follows that accounting policies should be aimed
at showing an entity’s operating results, rather than determining the
amount of distributable profits whilst bearing in mind the need for pro-
tection of creditors.
As a rule, accounting policies in accordance with IAS have a lower level
of prudence than German accounting policies, which leads to the follow-
ing major differences:
• minimization of possibilities of setting up and releasing hidden reserves;
• the acquisition cost and realization principles are generally valid,
however “unrealized” profits are to be included in the profit and loss
account in specific cases in order to determine the actual profit for
the period;
• the consistency requirement (recognition, valuation, classification,
consolidation) is to be strictly followed; changes in accounting policies
are only permitted if it can be proven that the change leads to an
improvement in the fair presentation of the financial statements;
• economic substance has precedence over legal form. The principle
of substance over form has a stronger influence in accounting policies
in accordance with IAS than in Germany. The principle states that the
economic substance of a transaction is of greater importance than the
formal (legal) form.
Consolidated financial statements in accordance with IAS consist of the
following:
• consolidated balance sheet,
• consolidated income statement,
• consolidated statement of cash flows,
• consolidated statement of changes in equity,
• Notes to the consolidated financial statements.
There are no specific rules setting out the way in which individual items
should be laid out in the balance sheet and income statement. Never-
theless, following generally accepted Anglo-Saxon classification formats,
an IAS balance sheet is normally set out in order of liquidity. The format
of the consolidated income statement is also broadly similar to the Anglo-
Saxon classification, using the cost of sales classification method.
The Notes to the consolidated financial statements include all disclosures
required as set out in § 266 and § 275 HGB.
Minority interests may not be included as part of group shareholders’
equity in the consolidated balance sheet. They must be shown as a
separate item between third-party capital and shareholders’ equity.
The consolidated income statement concludes with a disclosure of earn-
ings per share. Minority interests’ share in earnings is not included in
earnings per share.
b) Description of Major Differences in Accounting Policies Compared with
German Accounting Policies
The major differences in accounting policies in accordance with IAS
compared with German accounting policies in the consolidated financial
statements of the Company are as follows: