288 348
Parent Company Financial Report |
EXPLANATORY NOTES
2014 Annual Report
Prysmian Group
288
The preparation of financial statements requires manage-
ment to apply accounting policies and methods which, at
times, rely on subjective judgements and estimates based on
past experience and assumptions deemed to be reasonable
and realistic according to the circumstances. The application
of these estimates and assumptions influences the amounts
reported in the financial statements, meaning the statement
of financial position, the income statement, the statement
of comprehensive income and the statement of cash
flows, as well as the accompanying disclosures. Ultimate
amounts, previously reported on the basis of estimates and
assumptions, may differ from original estimates because of
the uncertain nature of the assumptions and conditions on
which the estimates were based.
The following is a brief description of the accounting policies
that require the management of Prysmian S.p.A. to exercise
greater subjectivity of judgement when preparing estimates
and for which a change in underlying assumptions could have
a significant impact on the financial statements.
(a) Provisions for risks and charges
Provisions are recognised for legal and tax risks and reflect
the risk of a negative outcome. The value of the provisions
recorded in the financial statements against such risks
represents the best estimate by management at that date.
This estimate requires the use of assumptions depending
on factors which may change over time and which could,
therefore, have a significant impact on the current estimates
made by management to prepare the Company's financial
statements.
D.
ESTIMATES AND ASSUMPTIONS
(b) Impairment of assets
In accordance with the accounting standards applied by
the Group, property, plant and equipment and intangible
assets with finite useful lives and equity investments are
tested for impairment. Any impairment loss is recognised by
means of a write-down, when indicators suggest it will be
difficult to recover the related net book value through use
of the assets. Verification of the existence of these indica-
tors requires management to make subjective judgements
based on information available within the Company and
from the market, as well as on past experience. In addition,
if a potential impairment loss is identified, the Company
determines the amount of such impairment using suitable
valuation techniques. Correct identification of indicators of
potential impairment, as well as the estimates for deter-
mining its amount, depend on factors which can vary over
time, thus influencing judgements and estimates made by
management.
Irrespective of the existence of indicators of potential im-
pairment or otherwise, all intangible assets not yet ready for
use must be tested for impairment once a year.
(c) Depreciation and amortisation
The cost of property, plant and equipment and intangible
assets is depreciated/amortised on a straight-line basis
over the estimated useful lives of the assets concerned. The
useful economic life of the Company's property, plant and
equipment and intangible assets is determined by man-
agement when assets are acquired. This is based on past
experience for similar assets, market conditions and expec-
tations regarding future events that could impact useful life,