Exchange differences arising on translating the financial  statements of foreign operations are recognised in other com- prehensive income. On the disposal of the interest in a foreign  operation, the cumulative amount of the exchange differences  is reclassified to profit or loss. The identifiable assets acquired, the liabilities and contingent  liabilities assumed that meet the recognition principles of IFRS 3  “Business Combinations” are measured at their acquisition-date  fair values, except: The Group applied the exemption under IFRS 1 and reclassi- fied the cumulative translation differences arising on the trans- lation of foreign operations to retained earnings at the date of  transition to IFRS. Sales are measured at the fair value of the consideration  received or receivable, less discounts, charge-backs and other  rebates, excluding sales taxes and value added taxes. Also,  the Group recognises the sales amount of transactions in  which the Group is acting as an agent on a net basis. Revenue from the sale of goods is recognised when all of  the following conditions have been satisfied, namely, the sig- nificant risks and rewards of ownership of the goods have  been transferred to the buyers, the Group retains neither con- tinuing managerial involvement nor effective control over the  goods sold, it is probable that the economic benefits will flow  to the Group, and the amount of revenue and costs associ- ated with the transaction can be reliably measured. Therefore,  revenue is usually recognised at the time of delivery of goods  to customers. Sales discounts, charge-backs and other  rebates are recognised as accounts payable, provisions or as  deductions from accounts receivable. Some of the Group’s revenues are generated from the agree- ments under which third parties have been granted rights to  produce or market products or rights to use technologies.  Royalty income is recognised on an accrual basis in accor- dance with the substance of the relevant agreement. Revenue  associated with milestone agreements is recognised upon  achievement of the milestones defined in the respective agree- ments. Upfront payments and licence fees received for agree- ments where the rights or obligations still exist are initially  recognised as deferred income and then recognised in income  as earned over the period of the development collaboration or  the manufacturing obligation. Expenditure on research and development of an internal project  is fully expensed as “Research and development expenses” in  Assets and liabilities of foreign operations are translated into  Japanese yen using the exchange rate at the end of fiscal year.  Income and expenses are translated into Japanese yen using  the average exchange rate for the period. At the end of each reporting period, monetary assets and  liabilities denominated in foreign currencies are translated into  the functional currency using the exchange rates at the closing  date and exchange differences arising from translation are  recognised in profit or loss. Foreign currency transactions are translated into the functional  currency using the exchange rates prevailing at the dates of  the transactions or an approximation of the rate. The financial statements of an entity of the Group are prepared  using the functional currency of the entity. The consolidated  financial statements of the Group are presented in Japanese  yen, which is the functional currency of the Company. Acquisition-related costs incurred in connection with busi- ness combinations, such as finder’s fees and advisory fees,  are expensed when incurred. The excess of the aggregate of the consideration transferred  and the amount recognised for non-controlling interest in the  acquiree over the acquisition-date fair value of the identifiable  net assets acquired is recorded as goodwill. If the excess is  negative, then a gain from a bargain purchase is immediately  recognised in profit or loss. · Deferred tax assets or liabilities, liabilities (or assets, if any)  related to employee benefits, and liabilities related to share- based payment transactions are recognised and measured in  accordance with IAS 12 “Income Taxes”, IAS 19 “Employee  Benefits”, and IFRS 2 “Share-based Payment”, respectively;  and · Non-current assets and disposal groups classified as held for  sale are measured in accordance with IFRS 5 “Non-current  Assets Held for Sale and Discontinued Operations”. The Group has adopted the exemption under IFRS 1 and  elected not to apply IFRS 3 “Business Combinations” retro- spectively to business combinations that had occurred before  1 April 2012 (the date of transition to IFRS). (3) Foreign currency translation (i) Functional and presentation currency (4) Sales (i) Sale of goods (iv) First-time adoption (5) Research and development expenses (iii) Foreign operations (ii) Transactions in foreign currencies (ii) Royalty income Astellas Pharma Inc.  _ Annual Report 2014 110