General notes / Accounting principles

For intangible assets acquired in a business combination and goodwill, see 5.5 Business combinations. Self developed and acquired software, not being an integral part of the related hardware is classified as an intangible asset. Costs of development, including direct costs and directly attributable overhead costs incurred are capitalised. Provisions are made for impairment if the recoverable amount falls below the book value. Amortisation of software is charged to the income statement on a straight-line basis over the estimated useful life of the software which is 3-8 years.

Property and equipment is measured at cost, less accumulated depreciation and any impairment losses. Where parts of an item of property and equipment have different useful lives, they are accounted for as separate items. Leases under the terms of which the Group assumed substantially all risks and rewards of ownership are classified as finance leases.

Depreciation is calculated by the straight-line method on the basis of the expected useful life, except for land which is not depreciated. The following annual depreciation rates are used:

5.5 Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and the fair value can be measured reliably. If the fair value cannot be measured reliably, the asset is not recognised as a separate intangible asset but is included in goodwill. Each acquisition is considered separately to determine if intangible assets can be identified and measured reliably. Industry specific intangibles are trademarks, customer relationships or candidate databases. For the acquisitions up until 2007, no intangibles were separately identified because of the interdependence between these intangibles and the acquired business as a whole including other non separable intangibles. As a consequence these intangibles cannot be measured reliably and are therefore not separated from goodwill.

Goodwill is considered to have an indefinite useful life and is stated at cost less any accumulated impairment losses. Intangible assets acquired in a business combination that have definite useful lives and are stated at cost less accumulated amortisation and impairment losses.

In connection with various acquisitions, Vedior has encouraged management of acquired companies to retain a minority equity interest. Vedior has entered into put and call options with the holders of these minority interests. The put option gives the minority shareholder the right to sell its minority interest to Vedior. The option exercise price is determined by a contractually agreed formula that includes dependence on future results of the subsidiary as well as a multiple. The call option gives Vedior the right to purchase the minority interest and is valid in certain default events only. In the normal course of events, the timing of exercise of the put options is not predetermined but is generally precluded for a minimum of three to five years from the date of acquisition.

Minority interests in the net assets of consolidated subsidiaries where a put option has been granted to the minority shareholder are identified separately from equity as a liability. The put option includes an obligation for Vedior to buy the shares held by the minority shareholder. The liability is recognised at fair value. The fair value is the expected cash outflow to settle the liability and is based on forecasted future earnings. The amount of the liability that is expected to settle within one year is classified in current liabilities. The amount that is expected to settle after one year is classified as non current liability under ‘deferred consideration business combinations’.

As of today, there remains uncertainty in IFRS regarding the treatment of the difference between the exercise price of the options and the carrying value of the minority interests that have to be reflected as financial liabilities. Until finalisation of phase two of the business combinations project of the IASB, Vedior has chosen to present such a difference as additional goodwill.

Minority interests in the net assets of consolidated subsidiaries are identified separately from equity as minority interests. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses are allocated to results attributable to minority interests until the minority interest is nil and for the remainder of the losses to results attributable to Vedior, except to the extent that the minority shareholder has a binding obligation and is able to make an additional investment to cover the losses.