

CONSOLIDATED FINANCIAL REPORT | EXPLANATORY NOTES
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VALUATION TECHNIQUES
Level 1
: The fair value of financial instruments quoted in an active market is based on market price at the
reporting date. The market price used for derivatives is the bid price, while for financial liabilities the ask price
is used.
Level 2
: Derivative financial instruments classified in this category include interest rate swaps, forward
currency contracts and metal derivative contracts that are not quoted in active markets. Fair value is
determined as follows:
for interest rate swaps, it is calculated on the basis of the present value of forecast future cash flows;
for forward currency contracts, it is determined using the forward exchange rate at the reporting date,
appropriately discounted;
for metal derivative contracts, it is determined using the prices of such metals at the reporting date,
appropriately discounted.
Level 3
: The fair value of instruments not quoted in an active market is primarily determined using valuation
techniques based on estimated discounted cash flows.
An increase/decrease in the Group's credit rating at 31 December 2015 would not have had significant
effects on net profit at that date.
D. ESTIMATES AND ASSUMPTIONS
The preparation of financial statements requires management to apply accounting policies and methods
which, at times, rely on judgements and estimates based on past experience and assumptions deemed to be
reasonable and realistic according to the related 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 Prysmian Group's management
to exercise greater subjectivity of judgement when preparing estimates and a change in whose underlying
assumptions could have a significant impact on the consolidated 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