Condensed Notes to the Consolidated Interim Financial Statements
Condensed Notes to the Consolidated Interim Financial Statements
as of June 30, 2008
Recognition and Valuation Principles
The condensed consolidated interim financial statements as of June 30, 2008, which form part of the half-year financial report pursuant to Section 37 of the German Securities Trading Act (WpHG), were reviewed by PricewaterhouseCoopers AG, Wirtschaftsprüfungsgesellschaft. The interim financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) and the related interpretations of the International Accounting Standards Board (IASB) applicable to interim financial reporting, which are endorsed by the European Union. The standards and interpretations already mandatory as of January 1, 2008 were observed. In compliance with IAS 34, the company opted for a condensed scope of reporting in the interim financial statements compared with the annual financial statements. Reference should be made as appropriate to the notes to the consolidated financial statements as of December 31, 2007, particularly with respect to the recognition and valuation principles applied.
Scope of Consolidation
The consolidated financial statements of the LANXESS Group include the parent company LANXESS AG along with all of its material domestic and foreign subsidiaries.
As of April 1, 2008, LANXESS acquired 69.68% of the capital and 72.38% of the voting rights of Brazilian synthetic rubber producer Petroflex Industria e Comercio S.A., headquartered in Rio de Janeiro. The company funded the purchase price payment out of existing credit facilities. LANXESS is currently preparing to make a public tender offer for the acquisition of the remaining shares in accordance with local regulations. First-time consolidation of the companies of the Petroflex group was effected as of April 1, 2008. Petroflex Industria e Comercio S.A., Rio de Janeiro, Brazil, and Petroflex Trading S.A., Montevideo, Uruguay, were fully consolidated in the financial statements of the LANXESS Group and assigned to the Performance Polymers segment.
Since its acquisition, Petroflex has contributed €132 million towards LANXESS’s consolidated sales and €3 million to the Group’s income after taxes. If Petroflex had been acquired as of January 1, 2008, it would have contributed some €270 million to LANXESS’s consolidated sales for the first half. It is impossible to determine with any certainty what amount Petroflex would have contributed to net income for the first half due to the adjustments made to the prior-year figures in the financial statements for the first quarter of 2008.
The acquisition was treated as a business combination pursuant to IFRS 3. Thus, in allocating the purchase price, the acquiree’s identifiable assets, liabilities and contingent liabilities were included at fair value. Any difference to the cost of acquisition represents goodwill. The following table gives a breakdown of the provisional purchase price allocation and details the impact of the acquisition on the balance sheet of the LANXESS Group.