Separate Financial Statements 2007 - Indesit

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Separate Financial Statements as of 31 December 2007 consolidated financial statements (classification by function), the separate income statement reclassified by function is also attached to these financial statements. Wrap S.p.A., a wholly-owned subsidiary, was merged into Indesit Company S.p.A. during the year, with accounting and tax effect from 1 January 2007. Overall, this transaction had no significant effect on the separate financial statements of Indesit Company, resulting in the recognition of a merger surplus of 1.1 million euro. Property, plant and equipment was the financial statements caption most affected by the absorption of Wrap S.p.A., with an increase in the balance as of 1 January 2007 by 7.5 million euro. Principal accounting policies Basis of preparation The currency of presentation of the separate financial statements is the euro, and the financial statements balances are stated in millions of euro (except where stated otherwise). The separate financial statements are prepared on an historical cost basis, except with regard to derivative financial instruments, financial assets held for sale and financial instruments classified as available for sale, which are stated at their fair value. Financial transactions are recorded with reference to the trade date. The accounting policies adopted for the preparation of the separate financial statements as of 31 December 2007 have also been applied on a consistent basis to all the comparative financial information. Accounting estimates The preparation of financial statements involves making assumptions and estimates that affect the assets and liabilities and the related disclosure, as well as contingent assets and liabilities at the reference date. These estimates are used to measure the property, plant and equipment and intangible assets subject to impairment, as well as to recognise provisions for doubtful accounts, inventory obsolescence, depreciation and amortization and the impairment of assets, employee benefits, taxation, and other provisions to risks and charges. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Estimates and assumptions are reviewed regularly and, if later estimates differ from those made initially, the effects are immediately reflected in the income statement. If the changes in estimate relate to both the current and future periods, their effects are reflected in the income statements for the periods concerned. Treatment of foreign currency transactions Foreign currency transactions All transactions are recorded in euro. Transactions not carried out in euro are translated using the exchange rates ruling at the time of the related transactions. Monetary assets and liabilities are translated using the exchange rates ruling at the balance sheet date and any exchange rate differences are recognised in the income statement. Non-monetary assets and liabilities recorded at historical cost in currencies other than the euro are translated using the historical rates applying at the time of the related transactions. Non-monetary assets and liabilities measured at fair value in currencies other than the euro are translated using the exchange rates ruling at the time that their fair value was determined. Derivative financial instruments 21
Separate Financial Statements as of 31 December 2007 If the conditions established in IAS 39 regarding the formal designation of derivative financial instruments as hedges are met and these instruments are shown to be highly effective, both ex ante when the transaction is arranged and ex post during subsequent accounting periods, then they are recorded on a hedge accounting basis, as described below. Fair Value Hedges (hedges of assets and liabilities) If a derivative financial instrument is designated to hedge the risk of changes in the fair value of an asset or liability reported in the balance sheet (the underlyings), the gain or loss deriving from subsequent fair-value adjustments to the hedging instrument is recorded in the income statement together with the gain or loss deriving from the valuation of the related underlyings. Cash Flow Hedges If a derivative financial instrument is designated to hedge the risk of variability in the cash flows of a recognised asset or liability or a highly probable forecasted transaction, the effective part of gains or losses on such financial instrument is recognised in the cash flow hedging reserve, within equity, while the ineffective portion (if any) is taken to the income statement. If the hedge of a forecasted transaction subsequently results in the recognition of a non-financial asset or liability, the cash flow hedging reserve is removed from equity and included in the initial cost of such non-financial asset or liability. If the hedge of an expected transaction subsequently involves recognition of a financial asset or liability, the cash flow hedging reserve is released to the income statement in the period when the acquired asset or recognised liability has an effect on the income statement. In other cases, the cash flow hedging reserve is recognised to the income statement in a manner consistent with the hedged transaction i.e. when its economic effects are recognised. If a hedging instrument expires, is sold or is terminated early with respect to the timing of the hedged transaction and the latter is no longer expected to take place, the related cash flow hedging reserve is released immediately to the income statement. If a hedging instrument expires, is sold or is terminated early with respect to the timing of the hedged forecast transaction, but the latter is still expected to occur, the cumulative gain or loss remains in equity until the transaction takes place. Hedge of a net investment in a foreign operation If a derivative financial instrument is designated to hedge a net investment in a foreign operation, the gains or losses deriving from the related fair value measurement are recognised directly is equity, to the extent that the hedge is deemed to be effective, while the ineffective portion (if any) is recorded in the income statement. If, on the other hand, financial instruments do not meet the requirements for the application of hedge accounting, they are stated at fair value and the related effects are recognised directly in the income statement. Property, plant and equipment Owned assets Property, plant and equipment are stated at purchase cost or, if constructed by the company, at production cost, comprising the cost of materials, labour and a reasonable portion of overheads and related charges, less accumulated depreciation and impairment losses determined on the basis described below. If necessary and significant, the cost of property, plant and equipment includes an initial estimate of dismantling and removal costs. Ordinary maintenance expenses are charged to the income statement, while the costs of replacing certain parts of property, plant and equipment and extraordinary maintenance costs are capitalised when it is probable that they will generate measurable economic benefits in the future. The financial expenses incurred to 22
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Separate Financial Statements 2007 - Indesit

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