General accounting principles and application of IFRS

Standards, interpretation and changes to published standards, application of which was not yet mandatory in 2010 and which were not applied early by the Group

The Group’s assessment of the effects of these new standards, interpretations and amendments to existing standards is set out below.

In November 2009 the IASB published the revised IAS 24 “Related Party Disclosures”, which replaces IAS 24 (2003). The new standard must be applied to financial years beginning on or after 1 January 2011. Among the major new features of IAS 24 (rev.) is the requirement for disclosures of, inter alia, guarantees, undertakings and other commitments which are dependent upon whether (or not) a particular event occurs in the future. The definition of a related entity or a related person is also clarified. The standard, the implications of which for the Group are currently under review, was ratified by the EU in July 2010.

In December 2009 the EU adopted the amendments to IAS 32 “Financial Instruments: Presentation – Classification of Rights Issues” in European law. IAS 32 was amended such that subscription rights as well as options and warrants for a fixed number of treasury shares against a fixed amount of any currency are to be classified as equity instruments as long as these are issued pro rata to all an entity’s existing shareholders of the same class. The amendments to IAS 32 must be applied to financial years beginning on or after 1 February 2010. It is not expected to have any implications for the consolidated financial statement.

IAS 19 “Prepayments of a Minimum Funding Requirement” (Amendments to IFRIC 14): This amendment was ratified by the EU in July 2010 and must be applied to financial years beginning on or after 1 January 2011. The amendments are of relevance if a pension plan provides for minimum funding requirements and the entity makes an early payment of contributions to cover those requirements. No implications for the Group are currently anticipated.

In November 2009 the IFRIC published IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”. The interpretation addresses accounting by the debtor if renegotiated contractual conditions of a financial liability enable it to extinguish all or part of a financial liability through the issue of its own equity instruments (debt for equity swaps). The equity instruments are to be measured at fair value upon issuance. Differences between the fair value of the equity instrument and the carrying amount of the extinguished liability are recognized in profit or loss. The interpretation was adopted by the EU in July 2010 and must be applied to financial years beginning on or after 1 July 2010. We do not expect application of the new standard to have any effect on the Group.

Also in November 2009 the IASB published a new standard on the classification and measurement of financial instruments, which was expanded in October 2010 to include rules governing the accounting of financial liabilities and derecognition of financial instruments. IFRS 9 is the first step in a three-phase project intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”. The new standard introduces a revised classification of financial assets. In future, the standard envisages only two categories of financial assets: those measured at “fair value” and at “amortized costs”. Reclassification will only be possible if the business model changes significantly. Equity investments that fall within the scope of application of IFRS 9 are to be measured at fair value in the balance sheet, with value changes recognized in profit or loss. An exception in this regard is an equity investment which an entity elects to measure at fair value through other comprehensive income (FVTOCI). The Group has still to analyze the full implications of IFRS 9. It is, however, already becoming clear that the revised rules will have an influence, inter alia, on the accounting of financial assets within the Group. The standard does not apply until financial years beginning on or after 1 January 2013; it has still to be adopted in European law.

On 7 October 2010 the IASB published amendments to IFRS 7 “Financial Instruments: Disclosures” which are applicable to financial years beginning on or after 1 July 2011. The amendments concern disclosure requirements in connection with the transfer of financial assets. A transfer of financial assets exists, for example, where receivables are sold or in the case of asset-backed securities (ABS) transactions. The amendments have still to be ratified by the EU. We are currently reviewing the implications for the consolidated financial statement.

In May 2010 the IASB published the third annual collection of minor amendments to IFRS – “Improvements to IFRSs (2010)”. Most amendments must be applied to financial years beginning on or after 1 January 2011; the EU ratified the standard in February 2011. We are currently examining the implications of these amendments for the consolidated financial statement.

In December 2010 the IASB published amendments to IAS 12 “Income Taxes”, which has still to be adopted by the EU. These new rules include clarification of the treatment of temporary tax differences in connection with measurement using the fair value model of IAS 40 “Investment Property”. The amendment enters into force for reporting years beginning on or after 1 January 2012. We do not expect the application of these amendments to have any effect on the consolidated financial statement.