Cash and Cash Equivalents
Cash in the consolidated balance sheet includes bank balances, cash on hand and demand deposits with a term of up to three months. The cash and cash equivalents in the consolidated cash flow statement are classified using the above definition.
In the fiscal year 2006/2007, the Company changed the accounting with respect to the allocation of cash equivalents. As of September 30, 2006, cash equivalents also included fixed-term deposits with a term of up to 12 months in particular, as the Company recorded considerable cash inflows in the fiscal year 2005/06 due to the IPO that was thus classified as not yet used for investing or financing activities. Further business acquisitions in the fiscal year 2006/07 and an adjusted investment strategy in the MAGIX Group meant that the prior classification of cash equivalents was no longer appropriate. The fixed-term deposits were reclassified to other financial assets accordingly.
Using the classification principles applied as of September 30, 2007, the amount of cash would have been kEUR 12,583 as of September 30, 2006. At the same time, other financial assets of kEUR 22,512 would have been reported on the asset side.
The change in classification principles for the cash and cash equivalents since the prior year was reported as a purchase of other financial assets in the cash flow from investing activities in the consolidated cash flow statement for the current fiscal year.
Trade Receivables
Trade receivables, which generally have 30-90 day terms, are recognized at the original invoice amount less an allowance for any uncollectible amounts. A bad debt allowance is recognized if there is material objective evidence that the MAGIX Group will not be able to collect the receivables. Receivables are derecognized as soon as they become uncollectible.
Inventories
Inventories are measured at the lower of cost and net realizable value. Costs incurred in bringing inventories to their current location and condition are – with the exception of borrowing costs – recorded at weighted averages (purchase price of commissioned and uncommissioned finished goods and raw materials). Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.
Treasury Shares
If the MAGIX Groups acquires treasury shares, these are deducted from equity at cost. The purchase, sale, issue or redemption of treasury shares is posted to equity. Treasury shares are reported in a separate item under equity.
Provisions
Provisions are recognized when the MAGIX Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.
Financial Liabilities / Interest-Bearing Loans and Other Liabilities
Financial liabilities reported in the consolidated balance sheet of the MAGIX Group mostly comprise interest-bearing loans and other liabilities. The initial recognition of a loan is at cost, which corresponds to the fair value of the consideration given after deducting any transaction costs needed to take out the loan. After initial recognition, all interest-bearing loans are measured at amortized cost using the effective interest rate method. A gain or loss is recognized in the net profit or loss for the period when the liabilities are derecognized or through the amortization process. Financial liabilities are derecognized when the liabilities have been settled, cancelled, or have expired.
Leases
Whether an arrangement is or contains a lease is determined on the basis of the substance of the arrangement and requires an estimate of whether performance of the contractual arrangement is dependent on the use of a certain asset or certain assets and whether a right to use the asset is granted under the arrangement.
Finance leases under which all the risks and rewards incidental to ownership of the transferred asset are substantially transferred to the MAGIX Group are recognized at the lower of the fair value of the leased asset or the present value of minimum lease payments at the inception of the lease. Lease payments are divided into the components finance costs and repayment of the lease liability in such a way that the residual carrying amount of the lease liability is subject to a constant interest rate. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the capitalized asset is depreciated over the shorter of the lease term or its useful life.
Lease payments on operating leases are recorded as an expense in the income statement on a straight-line basis over the term of the lease.
No finance leases are recorded in the consolidated financial statements of the MAGIX Group.