Vetoquinol Universal Registration Document 2019

66   Vetoquinol  Universal Registration Document 2019  Financial report 6 CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements The Group is composed of Vetoquinol SA and its subsi- diaries. It has one joint venture, Vetoquinol-Zenoaq KK (Japan), which is recognized using the equity method. Group companies are presented under Note 6.5.43 “Group companies”. 6.5.3.3 Business combinations Acquisition expenses, other than those arising from the issuance of debt or equity securities, incurred as a result of a business combination, are expensed as they are incurred. Within a period of one year from the date of acquisition: • changes in fair value due to facts and circumstances that existed as of the acquisition date result in adjust- ments to the cost of the business combination; • changes in fair value that are explicitly linked to events occurring after the acquisition date are posted to income; • following this period, any adjustment to the price of the business combination is recognized in income. The Group has a period of 12 months from the acquisi- tion date within which to finalize the accounting of the business combination in question. 6.5.3.4 Foreign currency translation 6.5.3.4.1 Functional currency and reporting currency The items included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in euros, the Com- pany’s reporting currency. 6.5.3.4.2 Transactions, assets and liabilities Among the Group companies, transactions in foreign currency are translated into the functional currency at the prevailing exchange rate at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate. Non-monetary items measured at historical cost are translated using the prevailing exchange rate as of the date of the transaction, whilst those measured at fair value are translated using the prevailing rate on the date when the fair value is determined. Exchange gains and losses resulting from these tran- sactions are recognized in income, except for: • those related to gains or losses recognized directly in other comprehensive income, which are recorded in equity, and • those arising from the translation of net investments in subsidiaries, which are recorded in other comprehen- sive income, then taken to income when the investment is sold. 6.5.3.4.3 Translation of Group company financial statements Group company financial statements denominated in functional currencies (excluding hyperinflationary eco- nomies) other than the reporting currency are translated into the reporting currency as follows: • assets and liabilities are translated at the closing rate as of the relevant balance sheet date; • income statement items are translated at the annual average exchange rate or, in the case of material tran- sactions, at the exchange rate applicable as of the date of the transaction; • all resulting exchange differences are recorded as a separate item in other comprehensive income.