Annual Report 2006

• Consolidated Income Statement
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement
• Income and Expense
• Notes to Finacial Statements
  • Consolidation Principles
  • Accounting Policies
  • Scope of Consolidation
  • Notes to Consolidated Income Statement
  • Notes to Consolidated Balance Sheet
  • Proposed Appropriation of Profits
  • Segment Reporting
  • Pro Forma Statements (IFRS-3)
  • Supervisory Board
  • Management Board
  • Declaration Corporate Governance
• Shareholdings of the GfK Group
• Auditors' Report

Pro forma statements in accordance with IFRS 3

As all acquisitions in 2006 were carried out with effect from January 1, pro forma statements according to IFRS 3 have not been necessary.

Pending litigation and claims for compensation

Following completion of the acquisition of NOP World, the seller asserted a claim against GfK AG for payment of certain settlements to NOP World companies.

The seller sees the basis for this claim, which amounts to less than 6% of the purchase price for the participation in NOP World in 2005, in the NOP World purchase agreement. No agreement was reached in the negotiations between GfK and the seller regarding the settlement amount and in August 2006, the seller then filed an action against GfK AG before the competent court in London. GfK AG has responded to this and does not consider the major points and the amount of the claim made by the seller to be justified, and has requested that the action be dismissed or offset with the claims of GfK.

GfK assumes that a settlement out of court will be achieved in 2007. Should this not be the case, a decision from the court of the first instance is expected in the first quarter of 2008.

Material risks arising from the circumstances described have already been recognized as liabilities.

No other material disputes involving GfK AG or one of its subsidiaries were pending as of December 31, 2006.

Events after the balance sheet date

No events that materially affect the GfK Group occurred after the reporting date.

Standards, interpretations and amendments published but not yet applied

The amendment to IAS 1 published in August 2005 (Presentation of Financial Statements: Capital Disclosures) was adopted by the European Union in January 2006. The change provides for additional disclosures, which enable the target group of the financial statements to assess the targets, methods and processes when managing their capital. The supplements to IAS 1 must be applied to financial years, which commence on or after January 1, 2007. The firsttime application will result in additional disclosures in the notes.

IFRS 7 (Financial Instruments: Disclosures), which was published by the IASB in August 2005, requires information about the importance of financial instruments for the net assets, financial position and results of operations and also includes new requirements with regard to qualitative and quantitative reporting on risks associated with financial instruments. The standard was adopted by the European Union in January 2006 and its application is binding for financial years starting on or after January 1, 2007, with earlier application being recommended. Since the GfK Group already publishes comprehensive information about financial instruments as part of risk reporting, no material impact on reporting is to be expected.

IFRIC 7 (Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies) was published in November 2005 and adopted by the European Union in May 2006. The application of IFRIC 7 is binding for financial years starting on or after March 1, 2006. This will have no impact on the financial statements of the GfK Group.

IFRIC 8 (Scope of IFRS 2), which was published in January 2006 and adopted by the European Union in September 2006 stipulates additionally to IFRS 2 (Share-based Payment) that IFRS 2 also applies to agreements in relation to which the company grants share-based payments in return for no or inadequate compensation. The application of IFRIC 8 is binding for financial years starting on or after May 1, 2006. IFRIC 8 does not impact on the financial statements of the GfK Group, as no such agreements exist at present.

IFRIC 9 (Reassessment of Embedded Derivatives) was published by the IFRIC in March 2006 and recognized by the European Union in September 2006. The interpretation sets out in concrete terms certain aspects of how embedded derivatives are accounted for according to IAS 39 and is compulsory for financial years starting on or after June 1, 2006. There are no consequences for the financial statements of the GfK Group arising from IFRIC 9.

IFRIC 10 (Interim Financial Reporting and Impairment), published in July 2006 but not yet recognized by the European Union, focuses on the interaction between the provisions of IAS 34 (Interim Reporting) and the regulations on reporting impairments relating to goodwill and specific financial assets. IFRIC 10 stipulates that impairments, which were reported in interim financial statements and for which a prohibition of reversal exists according to IAS 36 and 39 respectively, cannot be reversed in subsequent interim financial statements, year-end financial statements and consolidated financial statements.

The interpretation applies to financial years starting on or after November 1, 2006. In the past, the GfK Group has not reversed such impairments in subsequent financial statements if they were first reported in interim financial statements. IFRIC 10 therefore supports the practice used by the GfK Group to date and no further consequences result for the accounting of GfK.

With IFRS 8 (Operating Segments) segment reporting switches from the risk and reward approach of IAS 14 relating to segment identification to the management approach. This is based on the information regularly made available to the chief operating decision maker for decision-making purposes. At the same time, valuation of the segments is switched from the financial accounting approach of IAS 14 to the management approach.

IFRS 8 was published in November 2006. Recognition by the European Union is still outstanding. Application of the standard is binding for financial years starting on or after January 1, 2009. Earlier application is permissible.

The first-time application of IFRS 8 by the GfK Group in financial year 2007 will result in changes in the segment reporting.

IFRIC 11 (IFRS 2 – Group and Treasury Share Transactions) deals with the issue of how group share-based remuneration should be reported, which are the effects of staff changes within a group and how share-based payment should be treated when the company issues its own shares or needs to acquire shares from a third party. IFRIC 11 was published in November 2006. Recognition by the European Union is still outstanding.

IFRIC 11 must be applied for financial years starting on or after March 1, 2007. Earlier application is recommended. IFRIC 11 is not expected to have any impact on future financial statements of the GfK Group.

IFRIC 12 (Service Concession Arrangements) addresses accounting for infrastructure services by private companies and was published in November 2006. Recognition by the European Union is still outstanding. The interpretation is binding for financial years starting on or after January 1, 2008. Earlier application is permissible. IFRIC 12 is not expected to have any impact on future financial statements of the GfK Group.

In addition to the outlined standards, interpretations and amendments, the following statements have been issued by the IASB and IFRIC:

• Amendments to IFRS 1 (First-time Adoption of International Financial Reporting Standards) and IFRS 6 (Exploration for and Evaluation of Mineral Resources)

• IFRIC 5 (Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds) 
  

• IFRIC 6 (Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment)

These accounting principles are not relevant to the financial statements of the GfK Group and are therefore not explained in detail here.

Supplementary disclosures

Auditors’ service fee 

The expenses for the fee for the auditors of GfK Aktiengesellschaft, Nuremberg, amounted to EUR 921 thousand in 2006. The fee covers auditing the financial statements of GfK AG according to the German Commercial Code (HGB), the consolidated reporting package according to IFRS and the consolidated financial statements according to IFRS. The fee also includes the audit of the financial statements of German subsidiaries according to HGB and their IFRS reporting packages.
EUR 520 thousand were spent on tax advice from the auditors and EUR 175 thousand on other services by the auditors.

Exemption of a subsidiary from the obligation to prepare financial statements 

Pursuant to Section 264b of the German Commercial Code (HGB), GfK Marketing Services GmbH & Co. KG, Nuremberg, is exempt from preparing, having audited and publishing financial statements and a management report according to the provisions for joint stock companies as per Section 264ff.

Number of staff

In the year under review, 7,784 (2005: 6,806) staff were employed on average. The annual average number of staff was determined on the basis of full-time employees. The average was calculated, using the key dates of March 31, June 30, September 30 and December 31.

The allocation of staff to segments is shown in the following table.

 

Income for the year of major subsidiaries 

The following table lists the income for the year of the subsidiaries in the GfK Group with the highest sales in accordance with the German Corporate Governance Code.

 

Total remuneration and shares of the Management Board and Supervisory Board

Information about the remuneration of the Management Board and the Supervisory Board and their shareholdings is available in the remuneration report on page 15ff. of the Corporate Governance section.

An advance payment was made on the bonuses for the Management Board for 2006.

There were no other loans or advances to members of the Management Board and Supervisory Board.

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GfK Annual Report 2006

GfK 2006 Financial Statements