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recognised directly in equity;
• unrealised gains arising from transactions between the
Parent Company/subsidiaries and equity-accounted
companies, are eliminated to the extent of the Group’s
interest in the investee company; unrealised losses are also
eliminated unless they represent impairment.
JOINT VENTURES
A joint venture is a company characterised by a contractual
arrangement between the participating parties which
establishes joint control over the company’s economic
activity. Joint venture companies are consolidated on a
proportionate basis.
Under the proportionate consolidation method adopted by
the Company, its share of the joint venture’s assets and
liabilities are consolidated proportionately on a line-by-
line basis. The Company’s consolidated income statement
reflects a line-by-line aggregation of its share of the joint
venture’s income and expenses. The procedures described for
the consolidation of subsidiaries also apply to proportionate
consolidation.
SPECIAL PURPOSE ENTITIES
During 2007 the Group had defined and adopted a trade
receivables securitization programme for a number of Group
companies. The securitization programme was terminated on
25 July 2013 upon reaching its end date.
The accounting treatment adopted by the Group to present
the impact of this programme on the consolidated financial
statements at 31 December 2013 is described below.
The securitization programme involved the weekly transfer
of a significant portion of trade receivables by some of the
Group’s operating companies in France, Germany, Italy, the
United Kingdom and the United States. This programme
started on 30 January 2007 and, as already stated, finished at
the end of July 2013. These operating companies transferred
their receivables, directly or indirectly, to an Irish special
purpose entity (Prysmian Financial Services Ireland Ltd), set
up solely for the securitization programme. The Irish company
purchased these receivables using available liquidity, as well
as financing received from vehicle companies, sponsored
by the programme’s organising and underwriting banks,
which issued Commercial Paper in the form of A-1/P-1 rated
credit instruments backed by the receivables, which were
then placed with institutional investors. Subordinated loans
from the Group’s treasury companies were also used to fund
the purchase of these receivables. In accordance with the
provisions of
SIC 12 - Consolidation - Special Purpose Entities
(SPEs)
, the Irish special purpose entity was included in the
scope of consolidation of the Prysmian Group because it was
created to accomplish a narrow and well-defined objective.
Until effectively collected, receivables transferred to the
SPE were recognised in the Group’s consolidated financial
statements, together with the payables owed by the SPE
to third-party lenders. Group companies were identified as
the SPE sponsors, meaning the companies on whose behalf
the SPE had been created. At 31 December 2013, the special
purpose vehicle was essentially inactive, with the procedures
for its liquidation in the process of being completed.
TRANSLATION OF FOREIGN COMPANY FINANCIAL
STATEMENTS
The financial statements of subsidiaries, associates and
joint ventures are prepared in the currency of the primary
economic environment in which they operate (the “functional
currency”). The consolidated financial statements are
presented in Euro, which is the Prysmian Group’s functional
and presentation currency for its consolidated financial
reporting.
The rules for the translation of financial statements
expressed in currencies other than the Euro are as follows:
• assets and liabilities are translated using the exchange
rates applicable at the end of the reporting period;
• revenues and expenses are translated at the average rate
for the period/year;
• the “currency translation reserve” includes both the
translation differences generated by translating income
statement items at a different exchange rate from
the period-end rate and the differences generated by
translating opening equity amounts at a different exchange
rate from the period-end rate;
• goodwill and fair value adjustments arising from the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the period-
end exchange rate.
If a foreign entity operates in a hyperinflationary economy,
revenues and expenses are translated using the exchange
rate current at the reporting date. All amounts in the income
statement are restated by applying the change in the general
price index between the date when income and expenses
were initially recorded in the financial statements and
the reporting date. Corresponding figures for the previous
reporting period/year are restated by applying a general
price index so that the comparative financial statements are
presented in terms of the exchange rate current at the end of
the reporting period/year.
As at 31 December 2013, none of the consolidated companies
operated in hyperinflationary economies.
