General information
The parent company EEMS Italia S.p.A. is an Italian company whose shares are listed on the Mercato Telematico Azionario - Segmento STAR managed by Borsa Italiana.
The main geographical sectors and activities in which the EEMS Group operates are described in the section dealing with Segment Reporting.
Compliance with IFRS
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (subsequently referred to also as ‘‘IFRS’’) adopted by the European Union and in accordance with the regulations giving effect to article 9 of Legislative Decree 38/2005.
The consolidated financial statements to be submitted to the shareholders were authorised for publication on 14 March 2011.
The accounting standards applied are the following:
IFRS 2 Share-based payments
IFRS 5 Non-current assets held for sale and discontinued operations IFRS 7 Financial instruments - disclosures
IFRS 8 Operating segments
IAS 1 Presentation of financial statements IAS 2 Inventories
IAS 7 Statement of cash flows
IAS 8 Accounting policies, changes in accounting estimates and errors IAS 10 Events after the reporting period
IAS 11 Construction contracts IAS 12 Income taxes
IAS 16 Property, plant and equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 21 Changes in foreign exchange rates IAS 23 Borrowing costs
IAS 24 Related party disclosures
IAS 27 Consolidated and separate financial statements IAS 31 Interests in joint ventures
IAS 32 Financial instruments presentation and disclosure IAS 33 Earnings per share
IAS 36 Impairment of assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets
IAS 39 Financial instruments recognition and measurement
The following standards have not been applied in the consolidated financial statements since the relative conditions are not present:
IFRS 1 First-time adoption of international financial reporting standards IFRS 3 Business Combinations
IFRS 4 Insurance contracts
IFRS 6 Exploration for and evaluation of mineral resources IAS 20 Government grants
IAS 26 Retirement benefit plans IAS 28 Investments in associates
IAS 29 Financial reporting in hyperinflationary economies IAS 34 Interim financial reporting
IAS 40 Investment property IAS 41 Agriculture
The following interpretations have not been applied in the consolidated financial statements since the relative conditions are not present:
IFRIC 1 Changes in existing decommissioning, restoration and similar liabilities IFRIC 2 Members' shares in co-operative entities and similar instruments
IFRIC 4 Determining whether an arrangement contains a lease
IFRIC 5 Rights to interests arising from decommissioning, restoration and environmental funds
IFRIC 6 Liabilities arising from participating in a specific market - waste electrical and electronic equipment
IFRIC 7 Applying the restatement approach under IAS 29 - financial reporting in hyperinflationary economies
IFRIC 9 Reassessment of embedded derivatives IFRIC 10 Interim financial reporting and impairment IFRIC 12 Service concession arrangements
IFRIC 13 Customer loyalty programmes
IFRIC 14 The limit on a defined benefit asset, minimum funding requirements and their interaction
IFRIC 15 Agreements for the construction of real estate IFRIC 16 Hedges of a net investment in a foreign operation IFRIC 17 Distributions of non-cash assets to owners
IFRIC 18 Transfers of assets from customers SIC 7 Introduction of the euro
SIC 10 Government assistance - no specific relation to operating activities SIC 12 Consolidation - special purpose entities
SIC 13 Jointly controlled entities - non-monetary contributions by venturers SIC 15 Operating leases - incentives
SIC 21 Income taxes - recovery of revalued non-depreciable assets
SIC 25 Income taxes - changes in the tax status of an enterprise or its shareholders SIC 27 Evaluating the substance of transactions in the legal form of a lease
SIC 29 Disclosure - service concession arrangements
SIC 31 Revenue - barter transactions involving advertising services SIC 32 Intangible assets - website costs
The accounting standards are consistent with those applied in the preceding year except as indicated below.
The Group in 2010 adopted the following IFRSs, which were either new or revised, and the following IFRIC interpretations, which were either new or revised, which are effective from 1 January 2010:
- IFRS 2 Share-based Payments - Group transactions with share-based payments in cash.
Effective from 1 January 2010;
- IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and separate financial statements (Amended) effective from 1 July 2009 including resultant amendments to: IFRS 2, IFRS 5, IFRS 7, IAS 21, IAS 28, IAS 31 and IAS 39;
- IAS 39 Financial instruments recognition and measurement - eligible hedged items, effective from 1 July 2009;
- IFRIC 12 Service concession arrangements;
- IFRIC 15 Agreements for the construction of real estate;
- IFRIC 16 Hedges of a net investment in a foreign operation;
- IFRIC 17 Distributions of non-cash assets to owners;
- IFRIC 18 Transfers of assets from customers;
- Improvements to IFRS (issued by the IASB in May 2008);
- Improvements to IFRS (issued by the IASB in April 2009).
Where the adoption of a standard or interpretation has had an effect on the Group’s financial statements or performance, the effect is described hereunder:
IFRS 2 Share-based payments (Revised)
The IASB has issued an amendment to IFRS 2 clarifying the scope and accounting for intercompany transactions with share-based payments. The Group has adopted this amendment as from 1 January 2010 but this has had no impact on the Group’s financial position or performance.
IFRS 3R Business combinations and IAS 27/R Consolidated and separate financial statements The two standards were ratified and adopted in June 2009. IFRS 3R introduces a number of changes into the accounting for business combinations which will have effects on the amount of goodwill recorded, the result for the year in which the acquisition takes place and the results of ensuing years.
IAS 27R requires that a change in the portion of shares held in a subsidiary (without losing control) should be accounted for through equity. As a consequence, transactions of this type will no longer give rise to gains or losses. In addition, the amended standard changes the accounting treatment for transactions leading to a loss of control over a subsidiary. The changes introduced by IFRS 3R and IAS 27R have had no impact on the Group’s financial position or performance.
IAS 39 Financial instruments recognition and measurement – Eligible hedged items
The amendment, which was ratified and adopted by the European Commission on 15 September 2009, deals with the designation of a one-sided risk in an eligible hedged item and the designation of inflation as a hedged risk or a part of the risk in particular situations. The adoption of this amendment has had no impact on the Group’s financial position or performance.
IFRIC 12 Service concession arrangements
IFRIC 12 was ratified and adopted by the European Commission on 25 March 2009. This interpretation applies to operators who provide services under concession and establishes the accounting treatment for obligations taken on and rights received under a concession agreement.
The Group does not operate under concessions and accordingly this interpretation has had no impact on the Group’s financial position or performance.
IFRIC 15 Agreements for the construction of real estate
IFRIC 15 was ratified and adopted by the European Commission on 22 July 2009. IFRIC 15 provides clarification and guidance as to when income deriving from the construction of real estate should be recognised and whether an agreement for the construction of real estate falls within the scope of application of IAS 11 Construction Contracts or IAS 18 Revenue. The Group does not construct real estate and accordingly this interpretation has had no impact on the Group’s financial position or performance.
IFRIC 16 Hedges of a net investment in a foreign operation
IFRIC 16 was ratified and adopted by the European Commission on 4 June 2009. IFRIC 16 is an interpretation which clarifies the methods for the application of the requirements of IAS 21 and IAS 39 in cases where an entity hedges the exchange risk deriving from its net investment in a foreign operation. The Group does not engage in this type of hedging and accordingly this interpretation has had no impact on the Group’s financial position or performance.
IFRIC 17 Distributions of non-cash assets to owners
IFRIC 17 was ratified and adopted by the European Commission on 26 November 2009. IFRIC 17 is an interpretation which clarifies and gives guidance as to the accounting treatment for the interpretation clarifies and gives guidance as to the accounting treatment for property, plant and equipment received from customers or cash received from customers for the acquisition or construction of items of property, plant and equipment. This interpretation has had no impact on the Group’s financial position or performance.
Improvements to IFRS
In May 2008 and April 2009 the International Accounting Standards Board (IASB) issued a series of improvements to standards aimed at eliminating inconsistencies and clarifying terminology. Each standard presents ad hoc transitions clauses. These improvements have had no impact on the Group’s financial position or performance.
IFRSs and IFRICs to be adopted subsequent to 31 December 2010
The International Accounting Standards Board and IFRIC have issued further standards and interpretations which will become effective in periods subsequent to the date of the present financial statements. The Group has not adopted in advance any of such standards and interpretations. The main effects expected from their application are described hereunder.
Amendment to IFRIC 14 - Prepayments of a minimum funding requirement
On November 2009 the International Financial Reporting Interpretations Committee (IFRIC) issued amendments to Interpretation IFRIC 14 Prepayments of a minimum funding requirement. The aim of the amendments to IFRIC 14 is to eliminate an undesirable consequence of IFRIC 14 in cases where an entity which is to pay a minimum funding requirement makes an advance payment as a result of which in certain circumstances the entity making the advance payment would be required to record an expense. In the case where a defined benefit plan is subject to a minimum funding requirement, the amendment to IFRIC 14 requires the prepayment to be recorded as an asset, similar to any other advance payment. It is considered that the adoption of this amendment will have no significant effects on the Group’s financial statements.
IFRIC 19: Extinguishing financial liabilities with equity instruments
On 26 November 2009 the International Financial Reporting Interpretations Committee (IFRIC) issued interpretation IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments which gives guidelines as to how a debtor should account for equity instruments issued to entirely or partly extinguish a financial liability following the renegotiation of the relative conditions.
Companies should apply IFRIC 19 and the amendment to IFRS 1 at the latest by the starting date of their first financial year beginning after 30 June 2010. It is considered that the adoption of this amendment will have no significant effects on the Group’s financial statements.
IAS 24: Related party disclosures
On 4 November 2009 the International Accounting Standards Board (IASB) issued a revised version of IAS 24 - Related Party Disclosures. The changes introduced with the revision of IAS 24 simplify the definition of a “related party” at the same time eliminating certain inconsistencies and dispensing public entities from certain disclosures concerning related party transactions. Companies should apply IAS 24 and the amendments to IFRS 8 at the latest by the starting date of their first financial year beginning after 31 December 2010. It is considered that the adoption of this amendment will have no significant effects on the Group’s financial statements.
Amendment to IAS 32: Financial instruments – presentation and classification of rights issued On 8 October 2009, the IASB issued an amendment governing the accounting treatment for rights issued (rights, options or warrants) denominated in currencies other than the functional currency of the issuer. Previously such rights were recorded as liabilities from derivative financial instruments;
the amendment on the other hand requires, in certain conditions, that such rights be classified as equity regardless of the currency in which the exercise price is denominated. It is considered that the adoption of this amendment will have no significant effects on the Group’s financial statements.
IFRS 9: Financial instruments
The standard, effective from 1 January 2013, represents the first part of a process by phases aimed at the entire replacement of IAS 39 and introduces new criteria for the classification and measurement of financial assets and liabilities and for the derecognition from the financial statements of financial assets. In particular, for financial assets, the new standard uses an approach based on methods followed for managing financial instruments and on the characteristics of
contractual cash flows to determine the measurement criterion, replacing the various rules contained in IAS 39. For financial liabilities, on the other hand, the main change relates to the accounting treatment for fair value changes to a financial liability designated as a financial liability stated at fair value through profit and loss, in the case where they are due to a change in the credit worthiness of the liability. According to the new standard, such changes must be taken to Other comprehensive gains and losses and not taken through profit and loss. As at the date of the present financial statements, the competent organisms of the European Union have not yet concluded the ratification process for the application of the new standard.
Improvements to IFRS (issued in May 2010)
On 6 May 2010 the IASB issued a series of Improvements to IFRS which will be effective from 1 January 2011.
As at the date of the present financial statements, the competent organisms of the European Union have not yet concluded the ratification process for the following amendments:
Amendment to IFRS 7 issued by the IASB on 7 October 2010;
Amendment to IAS 12 - Recovery of Underlying Assets;
Amendment to IFRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters.
The EEMS Group has adopted International Accounting Standards and International Financial Reporting Standards (“IFRS”) as from financial year 2005, with the transition date to IFRS at 1 January 2004.
Bases of presentation
The consolidated financial statements comprise the consolidated balance sheet, income statement, statement of cash flows and statement of changes in equity, which have all been drawn up in accordance with IAS 1, and the notes to the consolidated financial statements which have been prepared in accordance with IFRSs adopted by the European Union and the regulations issued to give effect to Legislative Decree n° 38/2005.
Classification of expenses by nature has been followed for the consolidated income statement, the
“current/non-current” classification has been adopted for the consolidated balance sheet, and the consolidated statement of cash flows has been presented using the indirect method.
The consolidated financial statements have been presented in euros and all amounts have been rounded off to thousands of euros unless otherwise indicated.
To facilitate understanding of these financial statements at 31 December 2010, note should be taken of the following:
• activities in the photovoltaic sector are subject to seasonal changes
• there have been no operations which have significantly affected assets or liabilities in the consolidated balance sheet, consolidated shareholders' equity, or consolidated cash flows, other than those described in the notes to the consolidated financial statements (the latter include the sale of operations carried out through EEMS Test - see Note 4); in particular, the effects of the issue and refund of debt and equity securities are described in Notes 22 and 23;
• the estimates made are not based on assumptions which differ from those already used in drawing up the consolidated financial statements at 31 December 2009 except for natural developments;
• no dividends were paid to shareholders in 2010.
Consolidation principles and procedures
The consolidation includes the financial statements of the parent company EEMS Italia S.p.A.
(hereinafter referred to simply as EEMS or the Company or the parent company) and subsidiaries at 31 December 2010 over which control is directly or indirectly exercised through majority voting rights or where the Company has the power to determine, including through agreements, their financial and operational policies in order to benefit therefrom.
Subsidiaries are fully consolidated on a line-by-line basis as from the date on which the Group acquired control up to the date on which such control is transferred outside the Group.
Companies which are not consolidated, consisting of holdings in joint ventures (hereinafter also referred to simply as JVs) are stated at equity. Under the equity method the investment is initially taken up at cost and its book value is increased or decreased to reflect the investor’s share in the investee’s profit or loss which have been realised after the acquisition date, after any adjustments required by standards for the presentation of consolidated financial statements.
The financial statements of subsidiaries and joint ventures used for the consolidated financial statements are adjusted where necessary to match them with the accounting standards of the parent company.
In the preparation of the consolidated financial statements the assets, liabilities, revenues and expenses of the consolidated companies have been fully consolidated on a line-by-line basis and the minority interests in shareholders’ equity and the result for the year are disclosed separately in the consolidated balance sheet and consolidated income statement.
The book values of the holdings in each of the subsidiaries are eliminated against the corresponding portion of equity held in them adjusted to take account of the fair value of their assets and liabilities.
The difference arising, if positive, is recorded as goodwill and as such is accounted for in accordance with IFRS 3; if negative, it is charged off to profit and loss.
On consolidation, balances and transactions between consolidated companies are eliminated;
specifically, year-end receivables and payables, costs and revenues, and financial charges and income. Gains and losses realised between consolidated subsidiaries are also fully eliminated.
The consolidation area at 31 December 2010 has changed from the preceding year in that during 2010 the holding in the subsidiary EEMS Test Singapore Pte Ltd was sold; the effects of this are described in Note 4.
A list of companies included in the consolidation area is presented in Note 37.
Translation of financial statements drawn up in foreign currencies
The consolidated financial statements are presented in euros, which is the functional currency of the parent company which it uses in drawing up its financial statements. Financial statements used for the translation are expressed in the subsidiary’s functional currencies.
The functional currency adopted by the subsidiaries EEMS Asia Pte Ltd, EEMS Suzhou Co. Ltd, EEMS Technology Co. Ltd and EEMS China Pte Ltd is the US dollar; for Solsonica S.p.A and Solsonica Energia S.r.l. it is the euro. It should be recalled that EEMS Singapore Pte Ltd (whose functional currency is the Singapore dollar) is not operative. The functional currency of the joint venture Kopernico is the euro.
The rules applied for the translation of financial statements expressed in foreign currencies are as follows:
• assets and liabilities are translated using exchange rates applying at the balance sheet date;
• equity components, except for the results for the year, are translated at historical exchange rates;
• operational and other costs and revenues are translated at the average exchange rate for each month in the year.
Differences arising on translation are taken to the Translation reserve carried under equity for the portion relating to the Group and to Share capital and Reserves pertaining to minority interests for that pertaining to minority interests.
Exchange differences are taken to profit and loss at the time the subsidiary is sold.
For the consolidated statement of cash flows, average exchange rates are used to translate cash flows of foreign subsidiaries.
Goodwill and fair value adjustments arising on the acquisition of a foreign company are recognised in the same currency in which the assets and liabilities of the acquired company are expressed and are translated at year-end exchange rates.
The rates of exchange are those officially published by the European Central Bank.
Discretionary evaluations and significant accounting estimates
The preparation of Group financial statements requires the Directors to make discretionary evaluations, estimates and assumptions which can affect the amount of revenues, costs, assets and
The preparation of Group financial statements requires the Directors to make discretionary evaluations, estimates and assumptions which can affect the amount of revenues, costs, assets and