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Statutory financial statements at December 31, 2010
The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use. In assessing its
value in use, the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In assessing its value in use, the pre-tax estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. The assessment is carried out for the individual asset or for the smallest identifiable group of cash generating
assets (Cash generating unit). With reference to goodwill, management assesses return on investment with reference
to the smallest Cash generating unit including goodwill. If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
Impairment losses are recognized as an expense immediately.
Where the value of the Cash generating unit, inclusive of goodwill, is higher than the recoverable value, the difference
is subject to impairment and attributable firstly to goodwill; any exceeding difference is attributed on a proquota
basis to the assets of the Cash generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset, (or cash-generating unit), with
the exception of goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount that would have been determined had no impairment loss been recognized for the asset. A reversal
of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation increase.
Equity investments
Investments in subsidiaries and associates are stated at cost and are tested for impairment annually if there is any
evidence that these investments have been impaired, due to one or more events that occurred after the initial measurement
and such events have had an impact on the future cash flows inhibiting the distribution of dividends. Such
evidence exists when the subsidiary’s and associate’s operating margins are repetitively and significantly negative.
If such the case, impairment is recognized as the difference between the carrying value and the recoverable value,
normally determined as the greater of net selling price and value in use.
At each reporting period, the Company assesses whether there is evidence that an impairment stated in previous
periods may be lower or reversed. Such evidence exists when the subsidiary’s and associate’s operating margins are
repetitively and significantly positive. In this case, the recoverable value is re-measured and eventually the investment
is restated at initial cost.
Investments in other companies, comprising non-current financial assets that are not held for trading are initially
measured at fair value. Any subsequent profits and losses resulting from changes in fair value, arising from quoted
prices, are recognized directly in equity until the investment is sold or impaired; the total recognized in equity up to
that date are recognized in the Income Statement for the period.
Minor investments in other companies for which a market quotation is not available are measured at cost, adjusted
for impairment losses.
Dividends are recognized as financial income from investments when the right to collect them is established, which
generally coincides with the shareholders’ resolution. If such dividends arise from the distribution of reserves prior to
the acquisition, these dividends reduce the initial acquisition cost.
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