Annual Report - Sonova Holding AG

IAS 19 (Amendment), Employee Benefits
(effective from January 1, 2006).
IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast
Intragroup Transactions (effective from January 1, 2006).
IAS 39 (Amendment), The Fair Value Option
(effective from January 1, 2006).
IAS 39 and IFRS 4 (Amendment), Financial Guarantee Contracts
(effective from January 1, 2006).
IFRS 1 (Amendment), First-time Adoption of International
Financial Reporting Standards (effective from January 1, 2006).
IFRS 6, Exploration for and Evaluation of Mineral Resources
(effective from January 1,2006).
IFRS 7, Financial Instruments: Disclosures, and a complementary
Amendment to IAS 1, Presentation of Financial Statements –
Capital Disclosures (effective from January 1, 2007).
IFRIC 4, Determining whether an Arrangement contains a Lease
(effective from January 1, 2006).
IFRIC 5, Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
(effective from January 1, 2006).
IFRIC 6, Liabilities arising from Participating in a Specific
Market – Waste Electrical and Electronic Equipment
(effective from December 1, 2005).
The Group has assessed the effect of the changes of these
standards and has concluded that there will be no significant
effect on the Group’s result and financial position, although the
disclosure requirements will be expanded in certain areas,
notably IFRS 7 “Financial Instruments: Disclosures” which will
be effective from January 1, 2007.
3. Basis of the consolidated financial
statements
The consolidated financial statements of the Group are
based on the financial statements of the individual Group companies
at March 31 prepared in accordance with uniform
accounting policies. The consolidated financial statements have
been prepared under the historical cost convention except
for the revaluation of certain financial assets at market value, in
accordance with International Financial Reporting Standards
(IFRS), including International Accounting Standards and Interpretations
issued by the International Accounting Standards
Board (IASB). The consolidated financial statements were approved
by the Board of Directors of Phonak Holding AG on
May 12, 2006.
The consolidated financial statements include the financial
statements of Phonak Holding AG as well as the domestic and
foreign subsidiaries over which Phonak Holding AG exercises control.
A list of the significant companies which are consolidated
is given in Note 38.
The preparation of financial statements requires management
to make estimates and assumptions that affect the amounts
reported for assets and liabilities and contingent assets
and liabilities at the date of the financial statements as well as
revenue and expenses reported for the financial year. Actual
results could differ from these estimates.
3.1 Principles of consolidation
Investments in subsidiaries
Investments in subsidiaries are fully consolidated. These are
entities over which Phonak Holding AG directly or indirectly
exercises control. Control is the power to govern the financial
and operating policies of an entity so as to obtain benefits
from its activities. Control is presumed to exist when the parent
owns, directly or indirectly through subsidiaries, more than
half of the voting power of an entity unless, in exceptional
circumstances, it can be clearly demonstrated that such
ownership does not constitute control. Under the full consolidation
method, 100% of assets, liabilities, income and expenses
are included. The interests of minority shareholders in
equity and net income or loss are shown separately in the
balance sheet and income statement. Changes in minority interests
are accounted for using the “modified parent company
model”, with any excess of purchase consideration over the
carrying values of the attributable net assets acquired being
recorded as goodwill.
Group companies acquired during the year are included in the
consolidation from the date on which control over the company
is transferred to the Group, and are excluded from the consolidation
as of the date the Group ceases to have control over the
company. Intercompany balances and transactions (incl. unrealized
profit on inter-company inventories), are eliminated
in full.
Investments in associates
Investments in associates are accounted for using the
equity method of accounting. These are entities in which Phonak
has significant influence and which are neither subsidiaries
nor joint ventures of Phonak. Significant influence is the power
to participate in the financial and operating policy decisions
of the acquired company but is not control or joint control over
those policies (usually 20–50% of voting rights). Under the
Consolidated Financial Statements
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