Annual Report 2005 - Tenaris

Explanatory notes
56. TenarisConfab
1. Operations
Confab Industrial S.A. (hereinafter “Company”) is a publicly
traded corporation based in São Caetano do Sul, with
manufacturing plants in Pindamonhangaba, in the state
of São Paulo. Its main parent company is Siderca S.A.,
a subsidiary of Tenaris.
The main activities of the company and its subsidiaries
and associated companies involve the manufacture of welded
steel pipes for the petroleum, petrochemical, gas, mining
and sanitation industries, and industrial equipment for the
petroleum, petrochemical, pulp, metallurgical, steel industries,
among others.
The Company's performance in 2005 reflects the supply of
pipes and equipment for important infrastructure projects
in the petroleum, petrochemical, gas and sanitation industries,
a number of which were already included in the company's
order books on December 31st, 2004.
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2. Main accounting practices
a. Financial statements
The financial statements of the parent company and consolidated
financial statements have been prepared and are
presented in conformity with accounting practices adopted
in Brazil, and are in compliance with Corporation Law and
the norms of the Securities Commission-CVM.
In the preparation of financial statements, it is necessary to
make estimates when accounting for certain assets, liabilities
and other transactions. Therefore, the parent company
and consolidated financial statements include various estimates
about the working lives of property, plant and equipment,
provisions necessary for contingent liabilities, income
tax and the like. Accordingly, the actual results may differ
from the estimates.
b. Determination of income
Income is determined by the accrual basis of accounting,
taking into account the following:
Revenues from steel pipe sales are recognized only when it
is probable that the relative economic benefits will be
received by the Company and when the respective risks and
rewards are transferred to the customer.
The gross profit on contracts is recognized proportionally
to the work performed on each contract up to the date of
the balance sheet. Provisions for losses are made in those
cases where costs incurred to date plus the estimate of
costs still to be incurred exceed the total restated sale price.
Provision for income tax is constituted with the inclusion
of tax incentives. Deferred taxes were recognized at the
rates in force for income tax and social contribution on tax
losses and temporary differences, to the extent that realization
is probable (Note 16).