Currency translation and consolidation methods


The annual financial statements of foreign Group companies are translated into euros in accordance with the functional currency concept. The functional currency is mainly the currency of the country in which the company concerned is located. Occasionally, the functional currency differs from the national currency. Assets and liabilities are translated at the middle rates on the balance sheet date. Income statements are translated at the average exchange rates for the year.

These translation differences are recognised directly in shareholders’ equity without effect on profit or loss. Goodwill from capital consolidation of foreign subsidiaries prior to 2005 is carried at historical cost net of amortisation accumulated by the end of 2004.

Goodwill arising since 2005 has been recognised in the currency of the company acquired.

Transaction differences, however, are recognised in profit or loss. These differences arise in the financial statements of consolidated companies from assets and liabilities based on a currency other than the company’s functional currency. Any resulting exchange rate differences are included in other operating income as foreign currency transaction gains, or in other operating expenses as foreign exchange losses.

The most important exchange rates used in the consolidated financial statements have developed in relation to the euro as follows:

 

 

2010

2009

 

Balance sheet exchange rate

Income statement average rate

Balance sheet exchange rate

Income statement average rate

USD

0.74864

0.75815

0.69730

0.71635

JPY

0.00920

0.00863

0.00754

0.00765

GBP

1.16044

1.16902

1.12120

1.11784

CAD

0.74918

0.72974

0.66046

0.62882

HKD

0.09630

0.09761

0.08994

0.09247

THB

0.02495

0.02384

0.02092

0.02086

SEK

0.11145

0.10425

0.09741

0.09429

NOK

0.12793

0.12431

0.12029

0.11457

DKK

0.13414

0.13428

0.13438

0.13430

CHF

0.79847

0.72014

0.67283

0.66078

KRW

0.00067

0.00065

0.00060

0.00056

The effects of intra-Group transactions are completely eliminated in the course of consolidation. Receivables and liabilities between consolidated companies are netted and intra-Group profits and losses in non-current assets and inventories are eliminated. Intra-Group income is set off against the corresponding expenses. Tax accruals and deferrals are made as required by IAS 12 for temporary differences arising from consolidation.