Annual Report 2010/11 - Sonova

98
INveSTMeNTS IN JoINT veNTuReS
Investments in joint ventures are accounted for using the
equity method of accounting. Joint ventures are contractual
arrangements whereby two or more parties undertake an
economic activity that is subject to joint control. Joint
control is the contractually agreed sharing of control over
an economic activity, and exists only when the strategic
financial and operating decisions relating to the activity
require the unanimous consent of the parties sharing
control. under the equity method, the investment in a joint
venture is initially recognized at cost and the carrying
amount is increased or decreased to recognize Sonova’s
share of profit or loss of the jointly controlled entity after
the acquisition date. For applying the equity method the
most recent available financial statements of a joint venture
are used, however due to practicability reasons the reporting
dates might vary up to three months from the Group’s
reporting date. The net assets and results from joint ventures
are adjusted, if necessary, to comply with the Group’s
accounting policies.
The Group’s share of equity in joint ventures consolidated
using the equity method is shown in the balance sheet as
“Investments in associates/joint ventures,” and its share
of the results of oper ations for the year is shown in the
income statements as “Share of gain/loss in associates/
joint ventures.”
Joint ventures established during the year are accounted for
as “Investment in associates/joint ventures” from the date
on which joint control over the joint venture is transferred
to the Group and derecognized from that position as of the
date the Group ceases to have joint control.
3.2 Currency translation
The consolidated financial statements are expressed in
Swiss francs (“CHF”), which is the Group’s pres entation
currency. The functional currency of each Group company
is based on the local economic environment to which an
entity is exposed, which is normally the local currency.
Transactions in foreign currencies are accounted for at
the rates prevailing at the dates of the transactions. The
resulting exchange differences are recorded in the local
income statements of the Group companies and included in
net income.
Monetary assets and liabilities of Group companies which
are denominated in foreign currencies are translated using
year­end exchange rates. exchange differences are recorded
as an income or expense. Non­monetary assets and liabilities
are translated at historical exchange rates. exchange
differences arising on intercompany loans that are considered
part of the net investment in a foreign entity are
recorded in other comprehensive income in equity.
When translating foreign currency financial state ments into
Swiss francs, year­end exchange rates are applied to assets
and liabilities, while average an nual rates are applied to
income statement ac counts (see Note 34). Translation differences
arising from this process are recorded in other
comprehensive income in equity. on disposal of a Group
company, the related cumulative translation adjustment
is transferred from equity and included in the profit or loss
from the disposal in the income statements.
3.3 Accounting and valuation principles
CASH ANd CASH equIvALeNTS
This item includes cash on hand and cash at banks, bank
overdrafts, time deposits and other short­term highly liquid
investments with original maturities of three months or
less. The cash flow statement summarizes the movements in
cash and cash equivalents. The free cash flow is the net
amount of the cash flow from operating and from investing
activities.