Atari 2010 Annual Report Download - page 65

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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2.2. CONSOLIDATION METHODS
Full consolidation
All companies over which the Group exercises control, i.e. over which it has the power to govern the financial and
operating policies so as to obtain benefits from their activities, are fully consolidated.
Special-purpose entities are consolidated where, in substance, they are controlled by the Group. This is the case where
the Group has a right to the majority of the benefits of the special purpose entity’s activities, or where it retains the
majority of the residual risks related to the entity or its assets.
Equity method
Companies over which the Group exercises significant influence, either directly or indirectly, are accounted for by the
equity method.
Significant influence is deemed to exist when the Group holds, directly or indirectly, 20% or more of the voting rights of
an entity, unless it can be clearly demonstrated that this is not the case. The existence of significant influence can be
evidenced in other ways, such as through (i) representation on the Board of Directors or equivalent governing body of the
investee, (ii) participation in policy-making processes, (iii) material transactions with the investee, or (iv) interchange of
managerial personnel.
Non-consolidated entities
Equity interests held by the Group in non-consolidated entities are recognized as "Available-for-sale securities" and
measured at fair value, or at cost if the Group believes that this represents fair value when the securities concerned are
not traded in an active market. They are accounted for in accordance with IAS 32 and IAS 39 relating to financial
instruments. Unrealized gains and losses are recognized as a separate component of equity. If the value of an equity
interest becomes permanently impaired, the impairment loss is recognized in the income statement for the period. The
Group determines whether an equity interest is permanently impaired by reference to its estimated value, which is
calculated on the basis of the Group’s share in the net assets of the entity concerned, the entity’s market capitalization or
profit outlook, adjusted to take into consideration the impact for the Group of its ownership of said interest in terms of
strategy and synergies with existing activities. Impairment losses cannot be reversed if the estimated value of the
securities increases in the future, in which case an unrealized gain is recognized in the above-mentioned separate
component of equity.
A list of the Group's main subsidiaries and associates is provided in Note 29, together with the respective consolidation
methods used.
2.3. INTRA-GROUP TRANSACTIONS
All material intra-group transactions, balances and unrealized gains and losses on transactions between Group
companies are eliminated in consolidation.
2.4. TRANSACTIONS IN FOREIGN CURRENCIES
Foreign currency transactions are initially translated into the Company’s functional currency using the exchange rates
prevailing at the date of the transactions. At the balance sheet date monetary assets and liabilities denominated in
foreign currencies are translated at the closing exchange rate. The resulting exchange differences are recognized in the
income statement, except for those relating to borrowings in foreign currencies that qualify as a hedge of a net
investment in a foreign operation. Such gains and losses are recognized in equity until the net investment is disposed of.
Exchange gains and losses arising from the translation of the Group’s net investments in foreign operations are
recognized directly in equity.
2.5. TRANSLATION OF FOREIGN SUBSIDIARIES’ FINANCIAL STATEMENTS
The functional currency of foreign subsidiaries is the local currency of the country in which they operate.
The assets and liabilities of foreign subsidiaries are translated using the closing exchange rate at the balance sheet date.
Their income statements are translated using the average exchange rate for the period. Any resulting exchange
differences are recognized in equity, under “Cumulative translation adjustments” for those attributable to the Group and
"Minority interests" for those attributable to third parties. These exchange differences have no impact on profit unless the
entity concerned is sold. The table below sets out the exchange rates for the main foreign currencies used by the Group: