Foreign Currency Translation

In the Group companies’ individual financial statements, all of the receivables and liabilities in foreign currencies are translated at the rate prevailing on the balance sheet date, regardless of whether or not they have been hedged. Forward contracts which, from an economic point of view, are used for hedging are reported at fair value.

The financial statements of consolidated companies which are prepared in the local currencies are translated on the basis of the functional currency principle using the modified reporting date rate method. As the Group’s subsidiaries conduct their business along autonomous lines financially, commercially, and organizationally, the functional currency is basically identical to the company’s local currency. In the consolidated financial statements, expenses and income from the financial statements of subsidiaries prepared in a foreign currency are therefore basically translated at the average rate for the year, whereas assets and liabilities are translated at the closing date rate. Any currency differences arising from the translation of equity are recognized in the other equity items. Translation differences resulting from divergent exchange rates in the income statement are likewise included. If any Group companies are removed from the consolidated group, any translation difference is reclassified from equity to profit or loss.