Extracting ?xed asset information from the accounts
Henkel is a German-owned manufacturer of personal care and household products. Among its best- known international brands are Loctite adhesives, Fa cosmetics and Persil and Dixan laundry deter- gents. In 2001, Henkel sold its Cognis chemical business and its stake in the Henkel-Ecolab industrial and institutional hygiene joint venture in order to focus production and marketing efforts on its branded products.
Henkel draws up its financial statements according to IAS. It provides in the notes to the consolid- ated accounts a schedule showing the movement in fixed assets (including financial fixed assets) during the year. The schedule for 2001 is set out in Exhibit 8.9. All amounts are in A million.
Required
(a) What is the carrying amount of Henkel Group's tangible fixed assets at 31 December 2001?
(b) (i) Henkel reports in a separate note that it made a gain of 98 from the disposal of fixed assets in 2001. (This figure excludes the gains from disposal of its Cognis business and its stake in the Henkel-Ecolab joint venture.) Calculate the sale value of the fixed assets disposed of in 2001.
(ii) Henkel reports as an investing inflow in the 2001 consolidated cash flow statement 'proceeds from disposal of fixed assets' of 182. (Again, this amount does not include the proceeds from the sale of the Cognis and Henkel-Ecolab investments.) Why is this figure not the same as your answer to (b)(i)?
Exhibit: 8.9: Henkel Group: changes in ?xed assets schedule for 2001 (extract)
|
|
Intangible assets
|
Property, plant and equipment
|
Financialassets
|
Total
|
|
Cost
|
|
|
|
|
|
At January 1, 2001
|
3,687
|
7,386
|
925
|
11,998
|
|
Changes in the group*
|
-145
|
-2,944
|
-12
|
-3,101
|
|
Additions
|
40
|
534
|
731
|
1,305
|
|
Disposals
|
382
|
275
|
49
|
706
|
|
Reclassifications
|
3
|
-2
|
-1
|
-
|
|
Translation differences
|
66
|
49
|
34
|
149
|
|
At December 31, 2001
|
3,269
|
4,748
|
1,628
|
9,645
|
|
Accumulated depreciation
|
|
|
|
|
|
At January 1, 2001
|
1,085
|
4,615
|
3
|
5,703
|
|
Changes in the group*
|
-44
|
-1,961
|
1
|
-2,004
|
|
Write-ups
|
-
|
2
|
-
|
2
|
|
Depreciation and amortization
|
512
|
481
|
2
|
995
|
|
Disposals
|
371
|
226
|
-
|
597
|
|
Reclassifications
|
-
|
-
|
-
|
-
|
|
Translation differences
|
42
|
18
|
-
|
60
|
|
At December 31, 2001
|
1,224
|
2,925
|
6
|
4,155
|
|
Fixed assets (net) at December 31, 2001
|
2,045
|
1,823
|
1,622
|
5,490
|
|
* Disposal of Cognis chemical business and stake in Henkel-Ecolab joint venture.
|
(Source: Henkel Group, Annual Report 2001. Reproduced by permission of Henkel KGaA.)
(c) In preparing the consolidated accounts, Henkel's management must translate into euros the finan- cial statements of subsidiaries located outside the eurozone, before combining them with those of the company's eurozone subsidiaries. In most cases, it translates all assets and liabilities - including fixed assets - at the exchange rate prevailing on the balance sheet date. If, as is likely, exchange rates between the subsidiary's currency and the euro change between the start of the year (or the date of asset acquisition/disposal during the year) and the end of the year, exchange gains and losses arise. These are reported as a 'translation difference' in the 'Changes in fixed assets' schedule.
From inspection of the translation differences reported in Exhibit 8.9, did the euro strengthen or weaken overall against the currencies of Henkel's foreign subsidiaries? Give reasons for your answer.