PARENT COMPANY >
EXPLANATORY NOTES
266
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
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.
(b) Impairment of assets
In accordance with the accounting standards applied by the
Group, property, plant and equipment, 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 these indicators requires management
to make subjective judgements based on the 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 impairment indicators as well as
the estimates for determining the amount of impairment
depend on factors which can vary over time, thus influencing
judgements and estimates made by management.
Irrespective of the existence of potential impairment
indicators 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
management when assets are acquired. This is based on
past experience for similar assets, market conditions and
expectations regarding future events that could impact
useful life, including changes in technology. Therefore,
actual economic life may differ from estimated useful life.
The Company periodically reviews technological and sector
changes to update residual useful lives. This periodic update
may lead to a variation in the depreciation/amortisation
period and therefore also in the depreciation/amortisation
charge for future years.
(d) Taxes
Current taxes are calculated on the basis of the taxable
income for the year, applying the tax rates effective at the
end of the reporting period.
Deferred tax assets are recognised to the extent that it is
likely that future taxable income will be available against
which they can be recovered.
(e) Employee benefit obligations
The present value of the pension plans reported in the
financial statements depends on an independent actuarial
calculation and on a number of different assumptions. Any
changes in assumptions and in the discount rate used are
duly reflected in the present value calculation and may
have a significant impact on the consolidated figures. The
assumptions used for the actuarial calculation are examined
by the Company annually.
Present value is calculated by discounting future cash flows
at an interest rate equal to that on high-quality corporate
bonds issued in the currency in which the liability will be
settled and which takes account of the duration of the
related pension plan.
Further information can be found in Note 13. Employee
benefit obligations and Note 17. Personnel costs.
(f) Incentive plan
The employee share purchase plan involves granting options
to almost all of the Group’s employees. The operation of this
plan is described in Note 17. Personnel costs.
The grant of options is subject to an employee’s continued
professional relationship with the Group in the months
between signing up for one of the plan’s purchase windows
and the purchase of the shares themselves on the stock
market. The plan’s financial and economic impact has
therefore been estimated on the basis of the best possible
estimates and information currently available.
