Reply SpA

Consolidated financial statements as at December 31, 2010
Reply has adopted a structured system of periodic planning and budgeting aimed at defining the objectives and business
strategies in drafting the annual budget.
The impairment model adopted by the Group is based on future cash flows calculated through the Discounted cash
flow analysis.
In applying this model, Management utilizes assumptions which are applied to the single CGU from the first year following
the annual budget. The estimates are as follows:
Increase in revenues,
Increase in operating costs,
Investments,
Change in net capital.
The recovering value of the CGU, to which the single goodwill is referred, is determined as the highest between the
fair value less any selling costs (net selling price) and the present value of the estimated future cash flows expected
from the continuous use of the good (value in use). If the recovering value is higher than the carrying amount of the
CGU, there is no impairment of the asset, on the contrary when the model indicates a difference between the carrying
amount and the recovering value there is impairment.
The following assumptions were used in determining the recoverable value of the Cash Generating Units:
Terminal value growth rates: 1.0%
Discount rate, net of taxes: 8.89%
Discount rate, before taxes: 12.27%
As to all CGUs subject to impairment at December 31, 2010, no indications emerged that such businesses may have
been subject to impairment apart from the subsidiary Interactiv! which has undergone a total impairment.
Reply has also developed a sensitivity analysis of the estimated recoverable value by using discounted cash flows. The
Group considers that the discount rate is a key indicator in estimating the fair value and has therefore determined
that an increase of 100 basis points in the discount rate would not, also considering the presumable value, lead to an
excess of the carrying value of the CGU compared to its recoverable value, which tends to be significantly higher.
Finally, it is appropriate to note that the estimates and budget data to which the above mentioned parameters have
been applied are those determined by management on the basis of past performance and expectations of developments
in the markets in which the Group operates. Moreover, estimating the recoverable amount of cash generating
units requires discretion and the use of estimates by management The Group cannot guarantee that there will be no
goodwill impairment in future periods. Circumstances and events which could potentially cause further impairment
losses are constantly monitored by the Group.
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