Group - L. Possehl & Co. mbH

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Notes to the Consolidated Statements GENEraL iNforMatioN The consolidated financial statements of L. Possehl & Co. mbH, Lübeck, (subsequently referred to as L. Possehl) for the 2007 fiscal year have been prepared in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, HGB). The financial statements of the subsidiaries included in the consolidated financial statements have been prepared as of the same reporting date as that of L. Possehl. In the interest of clarity, individual items in the consolidated financial statements have been summarized in the balance sheet and income statement. However, they are disclosed separately and explained in the notes, along with the corresponding figures for the previous year. Due to their significance, individual receivables, provisions, and liabilities are disclosed separately in the balance sheet. The income statement is structured according to the nature of expense method. The consolidated financial statements have been prepared in Euro. All amounts are shown in thousand currency units except for the proposal on appropriation of net profit for the parent company. GroUP aNd CHaNGES to tHE GroUP of CoNSoLidatEd CoMPaNiES aNd aSSoCiatEd CoMPaNiES Group of Consolidated Companies In addition to the parent company L. Possehl, the consolidated financial statements include 27 domestic and 54 foreign production, trading, and service companies in which L. Possehl directly or indirectly holds a majority of voting rights. The option of not including certain subsidiaries provided by § 296 HGB was chosen for six companies due to their minor importance for the financial and earnings position of the Group. Shares in these subsidiaries are recognized at cost less any impairment losses. Further details are available in the attached overview of equity investments. 38 Changes to the Group of Consolidated Companies Changes to the group of consolidated companies from acquisitions or additional share purchases relate to: On April 1, 2007 Harburg-Freudenberger Maschinenbau GmbH acquired all of the shares of Pomini Rubber & Plastics S.r.l. On October 2, 2007 Hako-Werke International GmbH acquired an additional 38.7 % stake of Wega nova AG and now holds a total of 69.6 % of the share capital, including indirect interests. In addition, as of October 1, 2007, L. Possehl increased its stake in Hako Holding GmbH & Co. KG and Hako-Werke Beteiligungsverwaltungsgesellschaft mbH from 56.22 % to 100 %. The US-based Alumina Trading Company and the Netherlandsbased Van Mannekus & Co. B.V. are no longer fully consolidated, but included in the consolidated financial statements using the equity method. associated Companies Important equity investments are accounted for using the equity method if significant influence is exercised (associates). There are 15 associated companies. Four companies are not accounted for using the equity method as they are of minor importance for the financial and earnings position of the Group within the meaning of § 311 Para. 2 HGB. CoNSoLidatioN PriNCiPLES The financial statements of the companies included in the Group’s consolidated financial statements have been prepared according to uniform accounting principles. If the financial statements of associates differ significantly from the accounting principles applied within the Group, adjustments are made as necessary.
Equity is consolidated under the equity method by offsetting the carrying amount of the investment with the share of equity held at the time of acquisition. A positive difference between the carrying amount of the investment and the shares of equity held (goodwill) is offset against retained earnings in accordance with § 309 Para. 1 Sentence 3 HGB. A negative difference is recognized in retained earnings if it is attributable to equity and as a separate item in provisions if it is predominantly an expense. Equity investments accounted for as associates are recognized in the consolidated financial statements with the share of equity under the equity method at the time of acquisition or at the time of initial consolidation. A positive difference is offset against retained earnings. If the share of equity is higher at the time of initial consolidation, only cost is recognized. In following years, the carrying amount is adjusted for the share of profit or loss from these companies and the difference is recognized in the income statement. Dividend payments for prior years are deducted, but not recognized in the income statement. Uniform equity accounting is not conducted for foreign companies. Receivables and liabilities as well as sales, expenses and income between consolidated companies are eliminated. Interim profits from trading are eliminated. Income from internal sales of the company’s own products are reclassified to capitalized own work or changes in inventories. Letter from the Executive Board Company Boards Report of the Controlling Boards Successful over the Long Term Group Management Report Consolidated Financial Statements Further Information As they are of minor importance for the financial and earnings position of the Group, no interim profits from trading with associates need to be eliminated. Any impairment losses on intra-Group receivables recognized in the individual financial statements and impairment losses on shares in consolidated companies are reversed. Deferred tax assets and/or liabilities are recognized as necessary for consolidation procedures with effect on the income statement. In the consolidated financial statements, deferred tax assets and liabilities are offset against each other. CUrrENCy traNSLatioN The reporting currency of L. Possehl is the Euro. Currency translation of carrying amounts for subsidiaries in non-Euro countries takes place on a uniform basis at the middle rate on the balance sheet date. Any differences from a change in the exchange rate compared to the previous balance sheet date are recognized directly in equity. Translation of expenses and income, including the results for the year, takes place at average rates for the month. Currency differences from the use of different rates for translating the balance sheet and income statement are recognized in equity without effect on profit and loss in accordance with German Accounting Standard (GAS) 14. The following exchange rates were applied for the translation of the main foreign currencies in use in the Group: Rates in e as per balance sheet date Average rates in e Country Currency 2007 2006 2007 2006 USA USD 0.67930 0.75930 0.73074 0.79722 China RMB 0.09300 0.09728 0.09604 0.09997 Hong Kong HKD 0.08711 0.09765 0.09374 0.10258 Malaysia MYR 0.20541 0.21510 0.21259 0.21735 Singapore SGD 0.47252 0.49500 0.48478 0.50164 Translation differences for the opening amounts in the fixed asset schedule and provisions schedule and the schedule of changes in impairment losses between the exchange rate as of December 31, 2007 and the previous balance sheet rate are recognized in retained earnings without effect on the income statement. 39
Page 1 and 2: Annual Report 2007 Successful over
Page 3 and 4: Possehl - the Entrepreneurs’ Gr C
Page 5 and 6: Table of Contents Letter from the E
Page 7 and 8: Uwe Lüders, Born 1952, Dipl.-Volks
Page 9 and 10: dr. Lutz Peters Letter from the Exe
Page 11 and 12: All of this is essential for the su
Page 13 and 14: The organizational structure of Pos
Page 15 and 16: Possehl initially becomes deeply in
Page 17 and 18: Possehl views each of its companies
Page 19 and 20: ovErviEW of tHE ECoNoMiC CoNditioN
Page 21 and 22: StratEGiC dirECtioN aNd MaNaGEMENt
Page 23 and 24: The increase in net sales came prim
Page 25 and 26: Cleaning Machines: Significant Grow
Page 27 and 28: BALANCE SHEET STRUCTURE Fixed asset
Page 29 and 30: Letter from the Executive Board Com
Page 31 and 32: The regular reporting is supplement
Page 33 and 34: EPort oN SUBSEqUENt EvENtS, oPPortU
Page 35 and 36: Consolidated Balance Sheet as of De
Page 37 and 38: Consolidated Cash flow Statement fr
Page 39 and 40: Cumulative 01/01/2007 Exchange rate
Page 41: Group shareholders’ equity withou
Page 45 and 46: The biometric data underlying the m
Page 47 and 48: As per the balance sheet date, the
Page 49 and 50: NotES to tHE CoNSoLidatEd iNCoME St
Page 51 and 52: NotES to tHE CoNSoLidatEd CaSH fLoW
Page 53 and 54: auditors’ report * We have audite
Page 55 and 56: Name Registered in Letter from the
Page 57 and 58: CONTACT AND IMPRINT L. Possehl & Co

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