Matth. Hohner AG

Notes to the Consolidated Financial Statements for Business Year 2010/2011
Consolidation principles
The consolidated financial statement includes the financial statement of the Matth. Hohner Aktiengesellschaft
and its subsidiaries of March 31 of each business year. The financial statements of the subsidiaries and the
associate companies are generally prepared of the same balance sheet date as of the parent company;
Shanghai Lansheng-Hohner Musical Instruments Co., Ltd., Shanghai/China, which is included at equity with
a balance sheet date at December 31 because it is not possible to prepare interim financial statements with
appropriate effort is an exception.
Subsidiaries will be totally consolidated starting from the acquisition date, which means at the moment in which
the Group gains the control.
The equity holding in the consolidated financial statement ends, as soon as the control by the parent company
does no longer exist.
The actual value method takes place by offsetting the acquisition cost with the Groups’ interest of the fair
value of the identifiable assets, debts and contingent liabilities of the subsidiary at the acquisition date
(purchase method).
The consideration for an acquisition is defined by the sum of the offered assets at the acquisition date current
fair value and the received or assumed liabilities in replacement of the control of the acquired company.
If applicable, the consideration for an acquisition includes any assets and debts resulting from a contingent
consideration arrangement. The contingent consideration is valued by fair value at the acquisition-date.
Subsequent changes of these fair values will be adjusted against the acquisition costs, as long as it deals with
the correction within the assessment period. All other changes of the fair value as asset or as debt classed as a
contingent consideration will be accounted according to the respective IFRS.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports in its financial statements provisional amounts for the items for which
the accounting is incomplete. During the measurement period, the Group retrospectively adjusts the provisional
amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances
that existed as of the acquisition date and, if known, would have affected the measurement of the amounts
recognized as of that date.
The measurement period is the space from the acquisition date till the date in which the Group obtained full
information about facts and conditions of the acquisition date, however the measurement period not exceed
one year from the acquisition date.
The goodwill which occurs at a merger is recognized at the date of control. It complies the surplus of the sum
of the transferred consideration, the value of all non-controlling interest in the acquiree and the prior buyer’s
fair value of the equity in the acquiree (if given) and the net of the existing amounts of the acquired identifiable
asset values. If the acquisition costs exceed the fair values of the acquired identifiable assets, debts and
contingent liabilities, a goodwill will be accounted among the intangible assets. The goodwill will be subjected
to an annual impairment test (Impairment-only-Approach). If acquisition costs are lower than fair values of the
acquired identifiable assets, debts and contingent liabilities, the net will promptly accounted yield effectively.
All intercompany balances, transactions, incomes, expenses, profits and losses from intercompany transactions
which are contained in the book value of assets are fully eliminated.
Accounting and valuation policies
Estimates and assessments by management
For the preparation of the consolidated financial statements, estimates and assumptions had to be made,
which effect on recognition and measurement in the balance sheet and the profit- and loss statement or the
statement of comprehensive income. In spite of careful estimation, the actual realized amounts could differ to
the made assumptions. Estimations are especially required in:
• The impairment tests of intangible and tangible fixed assets, inventories, credits
and accounts receivables,
• The determination of the expected useful economic life of capital assets,
• The measurement of the feasibility of differed tax assets,
• The recognition and the measurement of the pensions, the provisions and other accruals.
The estimates were made on the basis of experiences and other relevant factors under consideration of the
going concern principle. All estimates and assumptions were made with best knowledge. The assumptions are
constantly reviewed in order to minimize false estimations.
The examination of the goodwill the cash-generating units and other requires basically the estimation of
future cash flows as well as their discounting. The estimations are forecasts based on the financial planning of
the management.
Other significant premises are discount factors as well as tax rates. A change of these factors may lead to
impairments.
Asset depreciation ranges are determined consistently across the group based on intercompany table of
the asset depreciation range. All asset depreciation ranges are annually examined and may be modified if
necessary. The actual useful economic life can differ from the forecasted.
Deferred taxes of loss carry forwards are estimated on the basis of the prospective feasibility of tax benefits.
The real fiscal profit situation in prospective periods and the real usability of loss carry forwards can be
differing from the estimation at the date of activation of deferred taxes. The measurement of accruals
is depending on the actual business case. Also it can be partly complex and considerable involved with
estimations.
Management’s assumption concerning the occurrence as well as the possible level of the real availment based
among other things to experience values, estimates and discount factors. The real availment can differ from
the recognition of the accruals insofar.
Notes to the CoNsolidated FiNaNCial statemeNts Notes to the CoNsolidated FiNaNCial statemeNts
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