The accounting and valuation methods applied in the past were maintained.

Intangible assets and property, plant and equipment were valued at cost of acquisition or production, less scheduled amortization and depreciation. Scheduled depreciation was recorded using the straight-line method of depreciation, based on the estimated useful life. Wherever it was possible or appropriate to show assets at a lower value, impairment losses were recorded.

Financial assets were also shown at the lower of cost or market value, whenever a sustained impairment in value was identified.

Inventories were capitalized at cost of acquisition or production; work in process and finished goods were carried at cost including an appropriate portion of material and production overhead. Adequate depreciation was recorded wherever market prices or the values determined were lower than the book values or where the salability of products and assets was impaired.

Accounts receivable and all other current assets were shown at their nominal value. Appropriate allowance was made for any specific bad debts identified. A general bad debt allowance was recorded to cover general credit risk.

Uncertain debts and potential losses from pending transactions were shown to an appropriate extent as accruals on the liabilities side.

Accruals for pensions and similar obligations were calculated according to the actuarial principles of IAS 19 and discounted to their present value throughout the Group.
Accruals for current taxes and for deferred taxes and other accruals provide appropriate cover of uncertain debts and potential losses from pending transactions. The item also comprises expense accruals as well as deferred tax accruals taken from the individual financial statements.

Liabilities are shown at the amount repayable.

Accounts receivable and accounts payable in foreign currencies were shown at cost of acquisition or at the lower/higher currency exchange rate applicable on the balance sheet date. Bank balances denominated in foreign currency were converted at the bank selling rate on the balance sheet date.

It is extremely difficult to gage the risk presented to our operational business by movements in exchange rates and interest rates. In order to minimize this risk, appropriate hedging activities were adopted, e.g., derivatives. Transactions are only concluded with banks, whose creditworthiness is impeccable, and then in accordance with uniform guidelines and strict internal auditing processes. The involvement of these banks is restricted to securing the business transaction and the financial investment and financing processes involved.

Deferred tax assets and liabilities were determined for all timing differences between the taxation and balance sheet values in accordance with the regulations of GAS 10 Deferred Taxes in Consolidated Financial Statements. The deferred taxes were determined on the basis of the tax rates expected at the time of recognition. These are based on the regulations adopted at the balance sheet date. No deferred tax assets on tax loss carry forwards or tax credits were formed.

Conversion of currencies
The financial statements of the foreign companies which do not report in euro were converted as follows:

• Equity: exchange rate at the time of acquisition or, alternatively, at the time of first consolidation
• Other items in the balance sheet: exchange rate as of the balance sheet date
• Items in the income statement: average exchange rate over the year

Values were adjusted to the regulations of GAS 14. Accordingly, all items in the income statement, including the net income for the year, have been converted using the average exchange rate for the first time in the 2006 business year.

In the development of fixed assets, exchange differences arising from the application of the current rate method have been netted with the opening balances, while deviations from the conversion of movements during the current year have been netted with disposals.

As in the past, any differences resulting from the conversion of items shown in the balance sheet into euro were offset against revenue reserves.