Consolidated Financial Statements - L. Possehl & Co. mbH

36
I. GENERAL INFORMATION
Consolidated Financial Statements
The consolidated fi nancial statements of L. Possehl & Co. mbH (hereinafter
referred to as L. Possehl) for fi scal year 2005 were prepared according
to the provisions of the German Commercial Code (HGB). The
fi nancial statements of the subsidiaries included in the consolidated
fi nancial statements are based on the balance sheet date of the fi nancial
statements of L. Possehl.
In order to improve clarity and meaning of the consolidated fi nancial
statements, individual items of the balance sheet and income statement
are combined and individually reported and explained in the
notes with the respective previous years’ amounts. Due to its essential
content of information, the individual accounts receivable, provisions
and liabilities of the balance sheet are reported separately. The income
statement is structured according to the cost of production method.
The consolidated fi nancial statements are drawn up in thousands (’000)
of Euro.
II. GROUP OF CONSOLIDATED COMPANIES AND
ASSOCIATED AFFILIATES
Besides L. Possehl, the consolidated fi nancial statements include 12
German and 33 international production, trading and services companies,
in which L. Possehl holds, whether directly or indirectly, the majority
of voting rights. Overall, nine subsidiaries are not fully consolidated
because of the minor importance on the net assets, fi nancial position
and earnings of the Group. Please refer to the attached overview of
participations for more information (see p. 56).
The following signifi cant changes in the group of consolidated companies
compared to the previous year should be mentioned:
In a purchase agreement dated March 24, 2005, L. Possehl acquired
all of the business shares in Harburg-Freudenberger Maschinenbau
GmbH, based in Hamburg, as well as its subsidiaries Harburg-Freudenberger
Belišce d.o.o. and HF Rubber Machinery, Inc. During the reporting
period, Harburg-Freudenberger Maschinenbau GmbH established
two additional subsidiaries in France and Russia, with the latter not yet
being included in the consolidated fi nancial statements due to their
minor importance.
Notes
The two companies Possehl do Brasil Ltda. and Nástrojárna Possehl
Electronic s.r.o. were disposed of during the reporting year and deconsolidated
at the beginning of the fi scal year.
Moreover, Nordstahl GmbH was merged with L. Possehl at the beginning
of the fi scal year.
Due to the acquisition of the Harburg-Freudenberger Group, Group
sales increased by about € 127 million. The consolidated balance sheet
total increased by a solid € 55 million as a result of this acquisition, and
the number of employees increased on average 822. The other changes
to the group of consolidated companies have not had a signifi cant impact
on the net assets, fi nancial position and earnings of the Group.
Major participations are measured according to the equity method if
they have a signifi cant infl uence. The number of associated companies
remains unchanged at 7.
III. GROUP ACCOUNTING PRINCIPLES
The annual fi nancial statements of the companies included in the
consolidated fi nancial statements are prepared in accordance with
standard accounting and valuation principles. If the fi nancial statements
of associated companies deviate from the Group’s standard
accounting principles, they are adjusted accordingly in the event
of signifi cant variations.
The consolidation of capital takes place according to the book value
method by offsetting the participation book value against the prorated
equity at the time of acquisition or addition. A positive amount resulting
from the difference of the participation book value and prorated equity
is offset against retained earnings.
The participations measured according to the provisions for associated
affi liates are reported by applying the book value method, i.e.
associated affi liates are carried at the prorated equity as of the date
of their acquisition or fi rst-time inclusion in the consolidated fi nancial
statements. Any resultant net equity under cost is offset against the
reserves retained from earnings. In case of net equity above cost, the
item is limited to the historical costs at the time of the initial consolidation.
In subsequent years, the value is adjusted for the prorated earnings
of these companies impacting earnings, with profi t distributions
for the previous years subtracted not impacting earnings.