ArcelorMittal South Africa 2007 Annual Report Page 82
Notes to the group and company annual financial statements continued
for the year ended 31 December 2007
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised
as gains or losses in the income statement, except when deferred in equity as qualifying cash flow hedges.
As referred to in note 3.17, Financial Assets, in the context of available-for-sale financial assets, changes in the fair value
of such monetary securities denominated in foreign currency are analysed between translation differences resulting from
changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation
differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amounts are
recognised in equity.
Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
• income and expenses for each income statement are translated at average exchange rates; and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are disclosed
in the statement of recognised income and expense and are taken to shareholders’ equity.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in
the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
The group used the following exchange rates for financial reporting purposes:
Rate at 31 December
2007
2006
ZAR to one USD
6,8133
6,9879
Average annual rate for the year
ended 31 December
2007
2006
ZAR to one USD
7,0555
6,7608
3.11
Property, plant and equipment
The net carrying amount, being the capitalised initial and subsequent costs (i.e. gross carrying amount) less
subsequent accumulated depreciation and impairment losses of property, plant and equipment is measured and
recognised on an historical cost basis.
Subsequent costs are included in the carrying amount of an item of property, plant and equipment or recognised
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognised.
