General information

Vedior N.V. (the ‘Company’ or the ‘Group’) is a company domiciled in the Netherlands and is quoted on the stock exchange of Euronext Amsterdam and included in the AEX index. The consolidated financial statements of the Company for the year ended 31 December 2005 comprise the Company and its subsidiaries.

All information in these financial statements is in millions of Euro, unless stated otherwise.

Statement of compliance

The consolidated financial statements have been prepared in compliance with International Financial Reporting Standards (‘IFRS’ or ‘IFRSs’) and the interpretations adopted by the International Accounting Standards Board (‘IASB’) as endorsed by the European Union. Until the year ended 31 December 2004, the Group’s consolidated financial statements have been prepared in compliance with generally accepted accounting principles in the Netherlands (‘Dutch GAAP’).

IFRS 1 (First-time Adoption of International Financial Reporting Standards) has been applied in these first financial statements based on IFRS. The reconciliations from Dutch GAAP to IFRS, required by this standard are included here.

Vedior adopted IAS 32 and 39 on financial instruments as from January 2005. Following the adoption of these standards, the consolidated balance sheet as at 1 January 2005 and the consolidated income statement for the year ended 31 December 2005 have been affected by the reclassification of the cumulative preferred shares in the joint-venture which financed the acquisition of Acsys Inc. in 2000.

The cumulative preferred shares, amounting to €30 million, are classified as minority interest until 2004. As from 1 January 2005 these shares were classified as an interest bearing loan in the balance sheet; they have been redeemed in May 2005.

The dividend on these shares of €2.4 million per annum is classified as financial expense in 2005, whereas in 2004 this was classified under minority interests.

Significant accounting principles

Basis of preparation
The financial statements are presented in Euro. They are prepared on the historical cost basis, except for certain provisions.

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements and in preparing the opening IFRS balance sheet at 1 January 2004 for the purpose of the transition to IFRS.

Principles of consolidation
Vedior N.V. and its subsidiary companies are fully consolidated. Subsidiary companies are companies where Vedior N.V. directly or indirectly has the power to govern the financial and operating policies. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Investments in companies in which Vedior N.V. has significant influence, but not control, over the financial and operating policies are accounted for by the equity method and are initially recorded at cost. Generally, significant influence is presumed to exist if at least 20% of the voting power is owned. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity accounting basis, from the date the significant influence commences until the date the significant influence ceases. If Vedior’s share in the losses of any of these companies exceeds the interest in the associate, the carrying amount of the investment is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group’s proportionate share of the total recognised gains and losses of associates on an equity accounting basis, from the date the joint control commences until the date that joint control ceases.

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

Segment reporting
A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing services within a particular economic environment which are subject to risks and returns that are different from those of segments operating in other economic environments. Vedior’s risks and returns at this moment are affected predominantly by differences in the service sectors (traditional versus professional/executive recruitment) and by differences in geographical locations. The primary format for reporting segment information is geographically, whereas the secondary segment information is reported per business sector.

From 2005, Vedior applies a revised allocation of corporate expenses to the various geographies. As a result, less costs were allocated to the UK (€2.1 million), the US (€0.9 million), Rest of Europe (€1.4 million) and Rest of World (€1.3 million), with corporate expenses increasing by €5.7 million, as compared to 2004.


Foreign currencies
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial information is presented in Euro, which is Vedior’s functional and presentation currency.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Euro at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Euro at rates approximating to the foreign exchange rates ruling at the dates of the transaction. The resulting translation adjustments are recorded as exchange differences within equity.

Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges are taken into the translation reserve. These differences are released into the income statement upon disposal.

In respect of all foreign operations, any differences that have arisen before 1 January 2004, the date of transition to IFRS, are presented as a separate component of equity in the Company balance sheet.

Property and equipment
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 economic 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 economic life, except for land which is not depreciated. The following annual depreciation rates are used:

 
Intangible assets

Goodwill
All business combinations performed by the Group are accounted for by the purchase method. Goodwill arises from the acquisition of subsidiaries, associates and joint-ventures. The goodwill arising on associates is included in the carrying amount of the investment in associates.

Accounting treatment as from 1 January 2004
Goodwill represents the difference between the cost of the acquisition and the fair value of the acquired net assets and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest, and are classified separately under the appropriate balance sheet captions.

Trademarks and brand names are not separable from goodwill and/ or are not reliably measurable and are therefore included in Goodwill.

Goodwill is considered to have an indefinite useful life and is stated at cost less any accumulated impairment losses. Tests for impairment are conducted annually.

Accounting treatment prior to 1 January 2004
Goodwill prior to this date is based on the amount recorded under Dutch GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 has not been restated under IFRS accounting principles. From 1 January 1999 until the year ended 2003, goodwill was capitalised and amortised over the useful economic life of seven years. Before 1999 goodwill was deducted directly from equity.

Software
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 is charged to the income statement on a straight-line basis over the estimated useful life of the software which is 3-7 years.