CONSOLIDATED FINANCIAL STATEMENTS >
EXPLANATORY NOTES
128
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
“Other payables” at their present value. The matching entry
differs according to whether:
A) the minority shareholders have a direct interest in the
performance of the subsidiary’s business in relation to the
transfer of the risks and rewards of the shares subject to
the put option. One of the indicators that such interest
exists is fair value measurement of the option exercise
price. In addition to the presence of this indicator, the
Group assesses on a case-by-case basis the facts and
circumstances characterising existing transactions. In
these circumstances, the present value of the option is
initially deducted from the equity reserves attributable to
the Group. Any subsequent changes in the measurement
of the option exercise price are recognised through the
income statement, as “Other income” or “Other expenses”.
B) the minority shareholders do not have a direct interest in
the performance of the business (eg. predetermined option
exercise price). The duly discounted option exercise price
is deducted from the corresponding amount of capital and
reserves attributable to non-controlling interests. Any
subsequent changes in the measurement of the option
exercise price follow the same treatment, with no impact
on the income statement.
There are currently no cases of this kind in the Prysmian
Group financial statements.
The treatment described would be modified for any new
interpretations or accounting standards in this regard.
ASSOCIATES
Associates are those entities over which the Group has
significant influence, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method and are
initially recorded at cost. Under the equity method:
• the book value of these investments reflects the value
of equity as adjusted, where necessary, to reflect the
application of IFRS and includes any higher values
identified on acquisition attributed to assets, liabilities and
any goodwill;
• the Group’s share of profits or losses is recognised from
the date significant influence is acquired until the date
it ceases. If a company valued under this method has
negative equity due to losses, the book value of the
investment is reduced to zero and additional losses are
provided for and a liability is recognised, only to the
extent that the Group is committed to fulfilling legal or
constructive obligations of the investee company; changes
in the equity of companies valued under the equity method
which are not accounted for through profit or loss, are
Subsidiaries are consolidated on a line-by-line basis.
The criteria adopted for line-by-line consolidation
are as follows:
• assets and liabilities, expenses and income of consolidated
entities are aggregated line-by-line and non-controlling
interests are allocated, where applicable, the relevant
portions of equity and profit for the period, which are then
reported separately within equity and the consolidated
income statement;
• gains and losses, including the relevant tax effect, arising
from transactions between companies consolidated on
a line-by-line basis are eliminated if not realised with
third parties; unrealised losses are not eliminated if there
is evidence that the asset transferred is impaired. The
following are also eliminated: intercompany payables
and receivables, intercompany expenses and income, and
intercompany finance income and costs;
• business combinations through which control of an entity
is acquired are recorded using the acquisition method
of accounting. The acquisition cost is measured as the
acquisition-date fair value of the assets acquired, the
liabilities incurred or assumed and the equity instruments
issued. The assets, liabilities and contingent liabilities
acquired are recognised at their acquisition-date fair
values. The excess of acquisition cost over the fair value of
the Group’s share of the identifiable net assets acquired
is recorded as goodwill under intangible assets. If the
acquisition cost is less than the Group’s share of the fair
value of the identifiable net assets acquired, the difference
is recognised as a gain directly in the income statement,
but only after reassessing that the fair values of the
net assets acquired and the acquisition cost have been
measured correctly;
• if non-controlling interests are acquired in entities which
are already under the Group’s control, the Group recognises
any difference between the acquisition cost and the related
share of net assets acquired directly in equity;
• gains or losses arising on the disposal of ownership
interests that result in a loss of control of consolidated
companies are recognised in the income statement at
the amount equal to the difference between the sale
consideration and the corresponding share of consolidated
equity sold;
• gains or losses from the deconsolidation of an investee’s
net assets, resulting from the difference between the fair
value of the equity interest and the corresponding portion
of equity, are recognised in “Finance income” and “Finance
costs” respectively.
In compliance with IAS 32, put options granted to minority
shareholders of subsidiary companies are recognised in
