N ON CURRENT A SSETS C LASSIFIED AS H ELD FOR S ALE

Non-current assets (and groups of assets being disposed of) are classified as held for sale when it is expected that their book value will be recovered by selling the asset rather than using it for the company’s operativity. This condition is met solely when the sale is very likely, the asset (or group of assets) is available for immediate sale in its current state and senior management has undertaken a commitment to sell the asset, with the sale expected to take place within 12 months of the date when the item was classified as being held for sale.

Non-current assets (and groups of assets being disposed of) classified as held for sale are valued at the lower of the previous book value and the market value less selling costs.

R

EVENUE

R

ECOGNITION

Operating revenue is valued at the fair value of the sum received net of returns, discounts, allowances and premiums, as follows:

• sales revenues, when the risks and rewards are transferred by ownership; • services revenues, at the time the service is effectively provided.

The Company classifies the differences in exchange rates arising from commercial transactions under operating income, and, more specifically, under “Other operating revenue” or “Other operating costs” according to whether the net effect is positive or negative, with detailed provided in the notes to the Financial Statements.

Dividends received

Dividends are recognized when the shareholders are entitled to receive them, which normally occurs in the period in which the Shareholders’ meeting of the company in which the investment is held approves the distribution of earnings or reserves.

P

ROPERTY

,

PLANT AND

E

QUIPMENT

Property, plant and equipment used for the production or the supply of goods and services are recognized at their historical cost, inclusive of any additional charges and direct costs required to make the asset available for use.

Property, plant and equipment are recognized at cost, net of accumulated amortization/depreciation and any impairment.

Amortization/depreciation is calculated on a straight-line basis by applying the following rates on the cost of the assets over their estimated useful life, which is reviewed annually:

189

Asset Category Depretiation Rate

Land 0%

Buildings from 3% to 10%

Plant and Equipment from 7.5% to 15%

Industrial and commercial equipment 15%

Furniture and fittings 12%

IT equipment 20%

Vehicles 25%

Gains and losses deriving from the sale or disposal of assets are measured as the difference between the sale price and the net book value and are recorded in the Income Statement for the year.

Ordinary maintenance expenses are fully recognized in the Income Statement.

Interventions to improve an asset with respect to its original verified condition are capitalized and depreciated in proportion to the residual useful life thereof.

The cost of improvements on goods leased from third parties that meet the prerequisites for being recognized as assets are reported under tangible fixed assets and depreciated at the shorter of the residual length of the concession and the residual useful life of the asset.

Leased assets

The leasing contracts under which the Group where there is not the transfer of all the risks and rewards of ownership are considered as operating leases.

Payments for operating leases are recognized on a straight-line basis over the duration of the contract.

Grants

Government grants are reported when it is reasonably certain that these will be received and that all the relative conditions are met.

Capitalized government grants related to tangible fixed assets are recognized as a direct deduction of the relative asset. The value of an asset is adjusted by systematic amortization/depreciation, calculated in relation to its possible residual use based on its useful life.

I

NTANGIBLE

A

SSETS

Intangible assets purchased separately are shown at cost less amortization/depreciation and impairment. Amortization/depreciation is charged on a straight line basis over the estimated useful life of the asset. The amortization/depreciation method and the residual life are reviewed at the end of each reporting period. The effects of changes in the amortization/depreciation method and the residual useful life are reflected in the accounting treatment going forward rather than retrospectively.

Internally Generated Intangible Assets – Research and Development Costs

Research costs are charged to the Income Statement in the period in which they are incurred. Intangible assets generated internally as a result of development as part of an internal project within the Group are only recorded as assets when all the following conditions are met:

Maire Tecnimont S.p.A.

• There is the technical possibility of completing the intangible asset and making it available for use or sale;

• There is the intention to complete the intangible asset and to use or sell it; • The ability to use or sell the intangible asset exists;

• It is probable that the asset created will generate future economic benefits;

• The technical, financial and other resources exist to complete the development and use or sell the asset during the development phase.

The original value of internally generated intangible assets initially recorded is the sum of the expenses incurred from the date on which the asset meets the abovementioned conditions. When internally generated intangible assets cannot be recognized, the related development costs are charged to the Income Statement in the period in which such expenses are incurred. Following their initial recognition, internally generated intangible assets are accounted for at cost less accumulated impairment, as is the case for intangible assets purchased separately.

Intangible Assets Acquired in Business Combination

Intangible assets acquired in a business combination are identified and recognized separately from amortization when they fulfill the definition of intangible asset and their fair value can be reliably measured. The cost of such intangible assets is their fair value on the date of award. After their initial recognition, intangible assets acquired in a business combination are shown at cost less amortization/depreciation and accumulated impairment, as is the case of intangible assets purchased separately.

I

MPAIRMENT OF

T

ANGIBLE

,I

NTANGIBLE AND

F

INANCIAL

A

SSETS

At each reporting date, the Company reviews the book values of its tangible, intangible and financial assets to determine whether there is any indication of impairments of value. Should it be impossible to estimate the recoverable value of an individual asset, the Company estimates the recoverable value of the cash-generating unit to which the asset belongs. Where these conditions exist, the Company estimates the recoverable amount of the assets to enable the computation of the value of any required write-down.

Intangible assets with an indefinite useful life, such as goodwill and trademarks, are tested for impairment annually or whenever there is indication of impairment.

The recoverable amount is the higher of the fair value net of selling expenses and the value in use. In calculating the value in use, estimated future cash flows are discounted to present value using a pre-tax rate that reflects current market valuations of the cost of money and the specific risks connected to the business.

If the recoverable amount of an asset (or of a cash-generating unit) is estimated to be lower than the relative book value, it is reduced to the lower recoverable value. An impairment loss is recognized immediately in the Income Statement.

When the impairment of an asset no longer exists or is reduced, the book value of the asset is increased to the new estimated recoverable value and cannot exceed the value that would have been determined it was not impairment occurred. The write back of an impairment loss is recognized immediately in the Income Statement.

F

INANCIAL

I

NSTRUMENTS

Financial assets and liabilities are recognized in the Statement of Financial Position at the moment when the Company becomes a party to the relative contractual clauses.

191

F

INANCIAL

A

SSETS

Receivables

Receivables are initially recognized at fair value and are subsequently valued at amortized cost, using the effective interest rate method, net of associated impairment related to amounts deemed uncollectable, which are set aside in a specific write down provision. Amounts considered uncollectable are estimated on the basis of of the realizable cash flows. Such flows take account of the expected time taken to collect, the presumed realizable value, any guarantees and the expected credit collection cost. The original value of the receivables is restored in subsequent financial years if the reasons for impairment cease to exist. In this case, the reversal is recognized in the Income Statement and may in no case exceed the amortized cost that the receivables would have had in the absence of previous adjustments. Trade receivables with a maturity falling within normal commercial terms are not adjusted to present value. Receivables denominated in a currency other than the operating currency of the individual companies are valued at the year-end exchange rate.

Other financial assets

The financial assets that the Company intends or is able to keep until maturity in accordance with IAS 39 are recognized at cost, reported at the date of the trade, corresponding to the fair value of the initial amount paid, plus any transaction costs (e.g. commissions, consultancy fees, etc.) directly attributable to the award of the asset. Subsequent to the initial assessment, such assets are valued at amortized cost, using the original effective interest rate method.

Any potential financial assets held for the purpose of generating a short-term profit are recognized and measured at fair value, with their effects recognized in the Income Statement. Any financial assets other than the ones previously mentioned are classified as financial instruments held for sale, measured at fair value with gains or losses recognized through shareholders’ equity. These gains or losses are recorded in the Income Statement as soon as the asset is sold or loss impairment. This latter category includes investments in companies other than subsidiaries, jointly-controlled ventures, and associated companies.

Cash and cash equivalents

This item includes cash, bank current accounts and deposits that are refundable on demand, as well as other short-term highly liquid investments that can be easily converted into cash with minor risks in terms of change in value.

F

INANCIAL

L

IABILITIES AND

E

QUITY

I

NSTRUMENTS

Financial liabilities and the Company’s equity instruments are classified in accordance with the substance of the underlying contractual agreements and in compliance with the respective definitions of liabilities and equity instruments. The latter are defined as contracts attributing the right to benefit from the residual interest in the Company’s assets after deducting all of its liabilities. The accounting standards adopted in relation to specific financial liabilities and equity instruments are described below.

Payables

Financial payables are initially recognized at cost, corresponding to the fair value of the liabilities, net of directly attributable transaction costs.

Maire Tecnimont S.p.A.

Subsequent to initial recognition, payables are valued at amortized cost, using the original effective interest rate method. This category includes interest-bearing bank loans and bank overdrafts.

Trade payables with normal commercial maturities are not adjusted to present value. Payables denominated in currencies other than the operating currency of the individual companies are valued at the year-end exchange rates.

M

ETHOD OF

D

ETERMINATION OF FAIR VALUE

Fair value is the value at which an asset (or a liability) can be exchanged in a transaction between independent parties having a reasonable degree of knowledge of market conditions and other meaningful elements related to the object of the negotiation. The definition of fair value implies the assumption that an entity is fully operating and that there is no necessity to liquidate or materially reduce business activities, or carry out transactions at unfavorable conditions. The fair value reflects the financial standing of the instrument as it incorporates the counterparty risk.

Receivables and Payables:

The fair value of receivables and payables recognized in the Statement of Financial Position at cost or at amortized cost, the fair value, for respect the information procedures, is determined according to the following methods:

• for short-term receivables and payables, it is held that the cashed-out/cashed-in value is reasonably close to their fair value;

• for long-term receivables and payables, the fair value assessment is mainly carried out through the future cash flow discounting method. Each future cash flow is discounted at a rate based on the zero-coupon yield increased by a margin representing the specific risk level of the counterparty.

Other Financial Instruments (Bonds and Securities)

The fair value of this category of financial assets is determined by taking into account the market prices at the Statement of Financial Position date, where these exist, or alternatively by using other valuation methods based exclusively on market data.

E

QUITY

I

NSTRUMENTS

Equity instruments issued by the Company are recognized on the basis of the amounts received in exchange for them, net of direct issuing costs.

D

ERECOGNITION OF

F

INANCIAL

I

NSTRUMENTS

The Group enters into factoring agreements by which it transfers contractual rights on receivables to third parties in exchange for the related cash flows. Such transactions may involve:

• the substantial transfer of the risks and rewards deriving from the ownership of the underlying financial asset;

• the Group maintaining a significant part or all of the abovementioned risks and rewards.

In the first case, the Group derecognizes the financial asset from its Statement of Financial Position and separately recognizes under assets and liabilities every right and obligation deriving from the transfer or maintained after the transaction.

193 In the second case, the Group continues to recognize the financial asset in its own Financial Statements.

S

HAREHOLDERS

’E

QUITY

Share Capital

The share capital is represented by the Company’s subscribed and paid-up capital. The direct costs incurred for the issuance of the shares are deducted from the share capital whenever such costs are directly attributable to the capital transaction.

Treasury shares

Treasury shares are represented as a negative item of Company shareholders’ equity. The costs incurred in relation to the issuance of new shares by the Company are deducted from the shareholders’ equity, net of any potential deferred tax impact. Gains or losses arising from the purchase, sale, issuance or cancellation of treasury shares are not recognized in the Income Statement.

Profit (Losses) carried forward

Profit or losses carried forward include the profits or losses for the year and those of the previous years, minus the portions thereof that have been distributed or allocated to reserves (in the case of earnings) or covered (in the event of losses). Further, the item includes the transfers from other reserves within shareholders’ equity if permitted under the limitations relevant to the specific reserves, as well as the effects arising from changes in accounting principles and material errors.

Other reserves

Other reserves include, among others, the statutory reserve and the extraordinary reserve.

Valuation Reserve

The valuation reserve includes, among others, the actuarial reserve on defined benefit plans recognized in shareholders’ equity.

C

ONTRACTUAL

L

IABILITIES

D

ERIVING

F

ROM

F

INANCIAL

G

UARANTEES

Contractual liabilities deriving from financial guarantees are initially recognized at fair value and subsequently at the higher of:

• the amount of the contractual obligation, determined in accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets;

• the amount initially recorded net, where appropriate, of any accumulated amortization recognized in accordance with the reporting of revenue as described above.

P

ROVISIONS FOR

R

ISKS AND

C

HARGES

Provisions are recognized in the Financial Statements when the Company has a current obligation (legal or constructive) as a result of a past event and will more than likely be requested to fulfill such obligation. Provisions are based on the best possible estimate of costs involved in settling the obligation at the reporting date and are discounted to present value when the effect is material.

Maire Tecnimont S.p.A.

When the Company believes that a provision for risks and charges has to be in part or entirely refunded or compensated, the indemnity is reported under assets only when the refund is virtually certain and the related amount can be reliably determined.

Onerous Contracts

If the Company has a contract that can be classified as onerous, the current obligation of the contract must be recorded and valued in the same way as a provision.

An onerous contract is a contract in which the non-discretional costs required to meet the obligation exceed the economic rewards expected from the contract itself.

Warranties

Provisions for warranty costs are recognized when it is probable that an intervention under guarantee on completed works is requested. Provisions are quantified based on senior management’s best possible estimate of the cost of meeting the obligation.

P

OST

-E

MPLOYMENT

B

ENEFITS

Payments into defined contribution plans are reported in the Income Statement in the period in which they become due.

With regard to defined benefit plans, the cost of benefits granted is determined using the projected unit credit method, and making actuarial valuations at year-end. Actuarial gains and losses are fully recognized in the period in which they arise and are reported directly in a specific reserve of shareholders’ equity. Past service cost is recognized immediately to the extent to which the benefits are already due.

Liabilities for post-employment benefits recognized in the Financial Statements reflect the current value of liabilities for defined benefit plans adjusted to account for actuarial gains and losses and costs of past services not reported and reduced by the fair value of the plan’s assets. Any net assets arising from such calculation are limited to the value of non-recognized actuarial losses and costs of past service, plus the current value of any repayments and reductions in future contributions to the plan.

Other Long-term Benefits

The accounting treatment of other long-tem benefits is the same as that applied to post- employment benefits, except for the fact that the actuarial gains and losses and the costs of past services are fully recognized in the Income Statement in the period in which these materialize.

F

INANCIAL

I

NCOME AND

E

XPENSE

Interest income and expense are recognized on an accrual basis using the effective interest rate method, using the interest rate that financially equalizes all incoming and outgoing cash flows (including any potential premiums, discounts, commissions, etc.) composing a specific transaction. The Company classifies under this item the changes in exchange rates arising from financial transactions, while the changes in exchange rates on commercial transactions are recognized under operating income, specifically under the item “Other operating revenue” or “Other operating costs”, according to their positive or negative impact; the relevant details

In document ANNUAL REPORT (Page 188-200)