PDF, 3.2 MB - Pfleiderer AG

Revenue Recognition
Sales revenues are mainly generated from the supply of products and services. These revenues
are recognized net of sales deductions, such as bonuses, cash discounts or rebates, at the date
at which they are deemed under US-GAAP to be realized or realizable and earned. This is generally
the case when persuasive evidence of an agreement exists, delivery has occurred or services
have been rendered, the price is fixed or clearly determinable, and collectability is reasonably
assured.
Revenues from long-term construction-type contracts are considered to be realized once the total
revenue, total costs and the percentage of completion can be determined to a sufficiently reliable
degree (“percentage of completion method”, as primarily defined in SOP 81-1 and ARB 45).
No revenues were generated during the past fiscal year under the percentage of completion
method.
Liquid Funds
Liquid funds comprise cash on hand and at banks, including current deposits with banks with
original maturities of up to three months.
Concentration of Credit Risks
The Group sells a broad range of products and services to a wide circle of industrial and commercial
customers in Germany and abroad. Outside Germany, the Pfleiderer Group is mainly
represented in Europe, Asia, Australia and South Africa. The concentration of credit risks on trade
receivables is already limited alone by the large number of customers. In addition, some of the
receivables are secured by credit insurance.
In the reporting period, about 4 percent (2003: 5 percent) of the total sales revenues were generated
with a single customer. The Company sees no credit standing risk in relation to this major
customer.
The Company invests cash reserves via current accounts at banks and other high quality investments
that can be liquidated at short notice. The Company monitors its credit risk by a regular
check of the credit standing of its investments. In addition, these investments are held exclusively
as deposits or short-term investments.
Receivables
Receivables are stated at net realizable value, i.e. at their face value less specific and general
allowances for doubtful accounts and less decreases in their value (bonuses, cash discounts and
sales deductions). Specific allowances are recorded if receivables are entirely or partly nonrecoverable
or if it is probable that they will not be recovered, and the non-recoverable amount
can be determined with sufficient accuracy. A lump-sum allowance is applied in the Business
Segment Infrastructure Technology to cover the general risk of default on receivables based on
historical experience of past bad debts. Adequate valuation adjustments for bonuses and cash
discounted are deducted on the assets side of the balance sheet.
76