2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code.
The financial statements have been prepared by the Executive Board of the Company and authorised for issue on 20 February 2007 and will be submitted for approval to the Annual General Meeting of Shareholders on 19 April 2007.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following assets and liabilities:
- available-for-sale investments are measured at fair value
- investments at fair value through profit and loss are measured at fair value
- derivative financial instruments are measured at fair value
- liabilities for equity-settled share-based payment arrangements are measured at fair value
The methods used to measure fair values are discussed further in note 4.
(c) Functional and presentation currency
These consolidated financial statements are presented in Euro, which is the Company’s functional currency. All financial information presented in Euro has been rounded to the nearest million.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:
- Note 6 business combinations.
- Note 14 measurement of the recoverable amounts of cash-generating units.
- Note 17 utilisation of tax losses.
- Note 26 measurement of defined benefit obligations.
- Note 27 measurement of share-based payments – Long-Term Incentive Plan.
- Note 28 and note 32 provisions and contingencies.
- Note 30 valuation of financial instruments.
