Annual Report 2012 - Knorr-Bremse AG.

150
Notes to the Consolidated Financial Statements
1
Principles and methods
The consolidated financial statements have been drawn up in accordance with generally accepted
accounting principles, complying with the accounting requirements of the German Commercial
Code (HGB) and additional statutory provisions. Figures in the consolidated financial statements are
shown in thousands of euros (TEUR). Certain items on the balance sheet and in the statement of income
are combined for the sake of greater clarity. These items are explained separately in the Notes
to the Consolidated Financial Statements.
Accounting and valuation
The financial statements of the companies included in the consolidated financial statements are
prepared according to uniform principles of accounting and valuation applied to the Group. For the
purposes of consolidation according to the equity method, any valuations in the financial statements
of the associated companies that deviate from the uniform principles applied to the Group are
retained.
Purchased intangible assets are valued at acquisition cost less scheduled depreciation; additional
depreciation is taken where necessary.
Fixed assets are recorded at acquisition or production cost, less scheduled depreciation in the case of
items subject to wear and tear; additional depreciation is taken where necessary. Depreciation on
fixed assets is generally applied using the linear method, based on useful life. In the case of German
companies included in consolidation, additions prior to January 2008 and after January 2009 are for
the most part depreciated using the declining balance method, switching over to the linear method
as soon as the latter results in higher depreciation. Minor fixed assets are depreciated to the maximum
extent permissible under the respective countries’ tax provisions.
Interests in affiliated, associated and related companies and miscellaneous investments are stated
at cost or, in the event of a probable sustained diminution in value, at fair value (where the latter is
lower).
Materials and supplies are carried in inventories at the lower of average acquisition cost or replacement
cost. Provision against realization risks is made where necessary.
Work in process and finished products are stated at production cost, but in no case higher than the
projected sales revenues less any costs accruing prior to sale. Production cost includes direct cost of
materials and labor, as well as production overhead. A reasonable allowance is made where there is a
risk of a decline in inventory values. Receivables are stated at their nominal value, less any necessary
provisions against specific debts. Receivables bearing no or low interest are stated at their net present
value. General charges have been made to cover the general credit risk.
Other assets are stated at the lower of average acquisition cost, net present value or fair value.
Earnings or disbursements prior to the balance sheet date are shown as prepaid income or prepaid
expenses where they represent revenues or expenses for a certain period after the balance sheet
date.