Porsche 2003 Annual Report Download - page 115

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Principles of Consolidation
The capital consolidation of the fully consolidated subsidiaries
is recorded in accordance with GAS (German Accounting Stan-
dard) No. 4 using the fair value purchase method, which offsets
the cost of acquisition against the proportionately revalued
shareholders’ equity of the subsidiary at the time of the initial
inclusion in the consolidated financial statements.
Goodwill resulting from the initial consolidation is capitalized as
an intangible asset. Associated companies are included in the
consolidated financial statements using the book value method,
pursuant to GAS No. 8.
Assets and liabilities of fully consolidated domestic and foreign
subsidiaries use the same accounting and valuation methods as
applied by Porsche AG.
To the extent valuations at associated companies do not con-
form to Porsche AG Group guidelines, no adjustment has been
made. Investments not consolidated using the equity method
are shown at acquisition cost.
Receivables and liabilities between the consolidated companies,
as well as intercompany profits and losses from sales and ser-
vices have been eliminated. Revenues and expenses resulting
from intercompany transactions are eliminated from the Porsche
Group’s statement of income.
The net income of Porsche AG available for distribution equals
the net income available for distribution in the consolidated
financial statements.
Accounting Principles and Valuation Methods
Acquired intangible assets are capitalized at acquisition cost
and amortized using the straight-line method over the expected
useful lives of the assets.
Additions to property, plant and equipment are valued at ac-
quisition or manufacturing costs. Internally generated property,
plant and equipment are capitalized at direct cost plus over-
heads in accordance with the German Income Tax regulations.
Depreciation is generally determined in accordance with the
estimated useful life guidelines established by the German
financial authorities or, in some cases, based on a shorter
expected useful life. For assets used in multiple shift produc-
tion, depreciation is increased by shift mark-ups. As far as
permissible by tax laws, the declining-balance method of cal-
culating depreciation is applied, additions were made up to
December 31, 2003 with a full year’s depreciation. From that
time on additions are depreciated pro rata temporis. The de-
clining-balance method is replaced by the straight-line method
(as permitted by Section 7 subsection 3 of the German Income
Tax Law) in the year when the change causes higher deprecia-
tion expense. Special tools and fixtures are depreciated based
on their actual usage. Leased vehicles capitalized in the con-
solidated financial statements are amortized over their future
estimated useful life on a straight-line basis or over the shorter
term of the lease considering the calculated residual value.
Low value assets are fully depreciated in the year of acquisition.
At Porsche AG, shares in affiliated companies and investments
are recorded at acquisition cost or, when deemed necessary,
at a lower value. Shares in associated companies are accounted
for in the consolidated financial statements using the equity-
method after eliminating any intercompany profits.
In order to improve the informative value of the lease and finan-
ce activities, the balance sheet classification and disclosure in
the notes has been adjusted in some respects for the current
and prior year. In the consolidated balance sheet the leased
assets are shown separately in the position fixed assets. Other
assets and other liabilities were further sub classified. Receiv-
ables from financial services and other financial liabilities con-
tained therein are explained separately.