1.1MB - Pirelli

Since 1 January 1999, the Euro has been the
currency of the Pirelli Group accounts. A new
EuroWeb site on the Intranet gives a constant
internal flow of information on the subject.
Introduction of the euro
The SAP systems in European countries affected by the introduction of the single
European currency were successfully converted to accommodate the euro by means of the
Release SAP 3.1.I.
Work on the Pirelli Information System will be completed for the conversion of accounting
systems from the local currency to the euro after the approval of the financial statements
at December 31, 1998.
The “Year 2000” problem
In mid-1997, Pirelli initiated the “Year 2000” Plan for all its subsidiaries, to be
coordinated by the Group holding company, with the aim of pinpointing and solving the
problems associated with the year 2000.
The activities, which directly involved all the Directors of the affiliates and their
operational structures, including information technology managers, involved both the
areas traditionally associated with information systems and non-information technology
areas, with special attention being paid to the activities of administration, factory
operations, R&D, procurement and logistics.
Many of the requirements for the adjustment to the year 2000 were included within the
context of a highly diversified process, already begun in previous years, to re-define the
most important software applications used by the Group holding company and its
subsidiaries. Over the last three years, this same process has led to a complete update of
the whole basic infrastructure of information technology, including the data-transmission
network, telephone switchboards and personal computers.
In 1998:
– all the analysis and verification activities to ensure conformity by the operating and
factory systems were completed;
– all the necessary measures were begun, and are in the process of completion;
– a certificate of compatibility was awarded to all the important suppliers, with the aim
of ensuring the minimum impact possible on the business operations of its affiliates.
During the second quarter of 1999, tests will take place to verify the efficacy of the action
that has been taken; in addition, a plan will be drawn up to ensure the continuity of
business, even in the presence of critical situations at the beginning of the new year.
In 1998, costs incurred were equal to approximately Lire 7 billion; in 1999, approximately
Lire 20 billion more will be needed to reach the conclusion of the plan. The write-downs
made to property, plant and equipment sold in 1998 had no significant impact.
On the basis of analyses carried out in-house, as well as external surveys and a careful
cost-benefit analysis, in 1998, extending insurance to cover the risks connected with the
passing into 2000 was not thought to be advisable. This problem is still being carefully
assessed and the correct decision will be reached in the course of the current year.
Overall, internal and external costs incurred for the activities associated with the “Year
2000” project have been directly charged to the statement of income. In accordance with
the concepts of prudence and accrual basis accounting, amounts capitalized — as is the
practice — refer only to the part of the cost relating to the replacement of assets made
necessary to comply with this singular event.
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