185000000 IT Holding Finance SA

IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2003
Negative goodwill arising on acquisition represents the excess of the fair value of the net identifiable assets acquired
over the cost of acquisition. To the extent that negative goodwill relates to an expectation of future losses and
expenses that are identified in the plan of acquisition and can be measured reliably, but which have not yet been
recognized, it is recognized in the income statement when the future losses and expenses are recognized. Any
remaining negative goodwill, but not exceeding the fair value of the non-monetary assets acquired, is recognized in
the income statement over the weighted average useful life of those assets that are depreciable/amortizable. Negative
goodwill in excess of the fair values of the non-monetary assets acquired is recognized immediately in the income
statement.
Commercial goodwill paid for the group’s sales premises is included into goodwill. It is amortized on the basis of the
duration of the lease contracts; where necessary carrying amounts are written down by the amount not expected to be
recovered through future revenues or sale.
Licenses, trademarks and permits
Acquired trademarks licenses and permits are stated at cost or at the attributed value at the date of the acquisition less
accumulated amortization and impairment losses.
Research and development expenditure
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding is recognized in the income statement as an expense as incurred.
Investment in collection development of all models and samples included into the catalogue of the new collection is
capitalized if the amount will be recoverable on the basis of the future economic benefit generated by the new
collection. The investment capitalized includes the cost of materials, and direct labour. Other development
expenditure is recognized in the income statement as an expense as incurred. Investment in collection development is
stated at cost less accumulated amortization and impairment losses.
Investments in collection development are amortized on a systematic basis following the expected path of future
economic benefits expected to flow to the company (i.e. on the basis of the rate of the revenues accounted for at year
end over the total expected revenues from the sale of the collection, represented by the orders collected). The path of
future economic benefits related to this investment is generally expected to be realised within twelve months.
Other intangible assets
Other intangible assets and deferred charges expected to benefit future periods are recorded at cost less accumulated
amortization and impairment losses.
Subsequent expenditure
Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
Amortization
Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets. Goodwill is
amortised from the date of initial recognition; other intangible assets are amortized from the date they are available for
use.
The applicable amortization periods are as follows:
goodwill 20 years
patents and trademarks 20 years
development costs generally 1 year
other intangible assets generally 5 years
Inventories
Inventories are stated at the lower of purchase or production cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
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