185000000 IT Holding Finance SA

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IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2003 The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the 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 risk specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of receivables is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional nature that is not excepted to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event. In respect of other assets, an impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Government grants Government grants are recognized in the balance sheet initially as deferred income when there is reasonable assurance that it will be received and the group will comply with the condition attaching to it. Grants that compensate the Group for expense incurred are recognized as revenues in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognized in the income statement as revenues on a systematic basis over the useful life of the asset. Share capital Treasury Shares When share capital recognized as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognized as a change in equity. Repurchased shares have been deducted from equity allocating the purchase price to capital stock for the nominal value of the shares and to share premium for the excess over the nominal value. Dividends Dividends are recognized as a liability in the period in which they are declared. Interest-bearing borrowings Interest-bearing borrowings are recognized initially at cost, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. Pension liabilities and termination leaving indemnities The Group’s contributions to defined contribution pension plans are charged to the income statement in the period to which the contributions relate. Termination leaving indemnities are calculated on an actuarial basis or in accordance with applicable local law to the extent that the amount of the liability does not differ materially from the amount which would have been calculated on an actuarial basis. All actuarial gains and losses as at January 1, 2001, the date of transition to IFRS, were recognized. F- 53
IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2003 Actuarial gains and losses that arise subsequent to January 1, 2001 in calculating the Group’s obligation with reference to the termination leaving indemnity for Italian employees (so called TFR) are not deferred and are charged to the income statement of the period in which they are calculated. Equity and equity related compensation benefit The Group had a stock option program which has been abandoned in 2002 and no option rights have been given or exercised in 2002 or 2003. Financial instruments Financial instruments are presented according to IAS 39. Accordingly, financial assets, to the extent relevant to the IT Holding Group, are classified as follows: held for trading; loans and receivables. Financial assets held for trading are classified as current asset and are stated at fair value, with any resultant gain or loss recognized in the income statement. The fair value of the financial assets is determined through reference to quoted market prices at the balance sheet date. If there are no market values available for the financial assets, the value is determined by reputable financial institutions on the basis of market conditions. Subsequent measurement of loans and receivables is at amortized cost using the effective interest method or historical cost on whether the assets have a fixed or non-fixed maturity. Provisions A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Agents’ termination benefits Agents’ termination benefits are calculated on the basis of the charge to be paid on the termination of agency contracts in compliance with law and other relevant factors such as historical data, the average length of the relation with the agents and their turnover. Tax provision The tax provision reflects estimated contingent tax liabilities that some Group companies may have to pay following the tax disputes currently pending with the tax authorities. Returns on sales The provision for returns on sales, set up to cover the unrealized profit arising from the difference between the sales value of possible returns to be received after year end, but pertaining to the year, and their estimated recovery value. Recognition of revenues Revenues from the sale of products are recognized on the transfer of ownership to third parties. Royalties are recognized at the time of sale of the licensed products and, in accordance with industry practice, are included in revenues. Should any product return or is expected to return or any commercial discount be recognized, the relevant value reduces revenues arising from the sale of goods. Cash discounts are recognized as financial costs. Rental income from investment property is recognized in the income statement on a straight-line basis over the term of the lease. F- 54
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CONFIDENTIAL Rule 144A Global Note
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Definitions In this annual report:
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• risks related to our principal
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Our Strategic Refocusing Program Du
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manufacturing of our products to th
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income tax on a consolidated basis
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(3) Net working capital is defined
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We must anticipate trends and respo
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We are subject to significant restr
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event of a foreclosure on the secur
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• avoid or invalidate all or a po
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a maximum of two years); (ii) a pro
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• pursuant to article 445 of the
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Our Company DESCRIPTION OF BUSINESS
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Versus is a medium-priced fashion b
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in print (fashion magazines and new
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We maintain a close working relatio
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Licensor and Brands Gianni Versace
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Legal proceedings Ordinary Course L
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OPERATING AND FINANCIAL REVIEW AND
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each year, when payments to our sup
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Income taxes In 2004, we incurred a
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Facilities and bank overdraft facil
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• €150.0 million principal amou
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Contractual obligations The followi
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An impairment loss in respect of go
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Salvatore Vicari has been a directo
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PRINCIPAL SHAREHOLDERS The table be
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invoiced to us by Pavia e Ansaldo -
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IT HOLDING S.p.A. Notes to the cons
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185000000 IT Holding Finance SA

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