Annual Review 2012 - Luxottica

Consolidated financial statements - NOTES
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Other companies
Investments in entities in which the Group does not have either control or significant
influence, generally with ownership of less than 20 percent, are originally recorded at cost
and subsequently measured at fair value.
Translation of the financial statements of foreign companies
The Group records transactions denominated in foreign currency in accordance with IAS
21 - The Effect of Changes in Foreign Exchange Rates.
The results and financial position of all the Group entities (none of which have the currency
of a hyper-inflationary economy) that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
(a) assets and liabilities for each consolidated statement of financial position presented
are translated at the closing rate at the date of that consolidated statement of financial
position;
(b) income and expenses for each consolidated statement of income are translated at
average exchange rates (unless this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the rate on the dates of the transactions);
and
(c) all resulting exchange differences are recognized in other comprehensive income.
Goodwill and fair value adjustments arising from the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing rate.
The exchange rates used in translating the results of foreign operations are reported in
the Exchange Rates Attachment to the Notes to the Consolidated Financial Statements.
COMPOSITION OF THE GROUP
The composition of the Group has changed during 2012 due to the acquisition of
the Brazilian entity Tecnol - Tecnica Nacional de Oculos Ltda, and two European
entities Sun Planet Retail S.L. in Spain and Sun Planet (Portugal) - Oculos de Sol, S.A.
in Portugal. Please refer to note 4 “Business Combinations,” and note 11 “Goodwill
and Intangible assets”, for a description of the primary changes to the composition of
the Group.
SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. Investments qualify as cash
equivalents only when they have a maturity of three months or less from the date of the
acquisition.