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, 2002 statement of income captions are translated to euro at the average rates for the year; foreign exchange differences arising on translation are recognized directly in equity. The exchange rates of the Euro to the principal foreign currencies used to prepare the consolidated financial statements are the following: 2002 2001 Year-end Average Year-end Average USD.............................................................................................................. 1.0487 0.9463 0.8813 0.8955 CHF.............................................................................................................. 1.4524 1.4671 1.4829 1.5105 GBP.............................................................................................................. 0.6505 0.6290 0.6085 0.6217 HKD............................................................................................................. 8.1781 7.3787 6.8723 6.9836 JPY.............................................................................................................. 124.3900 118.1400 115.3300 107.6700 CAD ........................................................................................................ 1.6550 1.4845 — — Derivative financial instruments Derivative financial instrument are used by the IT Holding Group solely for the purpose of hedging interest rate risk and currency exposure arising from operations. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading or speculative purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivatives financial instruments are recognized initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The market value of IRSs reflects the present value difference between the fixed rate to be paid/received and the interest rate assessed on the basis of the market trend having the same expiry date as the swap. The fair value of forward exchange contracts and currency options is estimated by reputable financial institutions on the basis of market conditions. The counterparties to derivative contracts are generally highly rated banks and financial institutions in order to minimize the risk of non-performance. Hedging Cash flow hedges of interest rate risk Changes in fair values of derivatives that are designated and qualified as Cash flow hedges and that are highly effective are deferred in the equity account, “Hedging reserve”. Amounts deferred in the “Hedging reserve” and any subsequent changes in the value of the derivatives are recorded in the income statement in the same period and classified in the same income statement accounts as the related hedged transactions. Hedge of foreign exchange exposure Where a derivative financial instrument is used to economically hedge the foreign exchange exposure of a forecasted turnover or recognized monetary asset or liabilities, any gain or loss on the hedging instrument is recognized in the income statement because the Group until December 2002 did not yet apply hedge accounting rules as presented in IAS 39. Property, plant and equipment Property, plant and equipment are carried at cost or deemed cost less accumulated depreciation and impairment loss, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the fixed assets or the term of the lease. F- 89
IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 The applicable depreciation rates for 2002 and 2001 are as follows: Industrial buildings ..................................................................................................................................................... 3.0 General plant, light constructions, and operating machinery .................................................................................... 10.0 General plant and operating machinery purchased after January 1, 1989................................................................. 12.5 Office furniture and equipment .................................................................................................................................. 12.0 Canteen equipment and fittings.................................................................................................................................. 12.5 Furnishings.................................................................................................................................................................. 15.0 Electronic machines 20.0 Miscellaneous and small equipment .......................................................................................................................... 25.0 Automobiles................................................................................................................................................................. 25.0 Motor vehicles and internal means of transport....................................................................................................... 20.0 Land is not depreciated. Leasehold improvements and general store equipment are depreciated over the expected lease term. The cost of major renovations is included in the carrying amount of the assets when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related assets. All other expenditure is recognized in the income statement as an expense as incurred. Certain items of property and plant have been revalued to fair value at the date of transition to IFRS, January 1, 2001. In accordance to IFRS 1 the Group has elected to use that fair value as its deemed cost at that date. Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and stated at cost until construction or development is complete, at which time it is reclassified as investment property. Leases Leases of property, plant and equipment, where the Group assumes substantially all the risk and rewards of ownership, are classified as finance leases. Plant and equipment acquired by way of financial lease is stated at an amount equal to the lower of the fair value of the leased property or the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses, if any. Property, plant and equipment acquired under finance leases is depreciated over the lease term. The interest expense component of financial lease payment is recognized in the income statement using the effective interest rate method. Goodwill, trademarks, other intangible assets and deferred charges Goodwill Goodwill (positive or negative) represents amounts arising on acquisition of subsidiaries, associates and joint ventures. In respect of acquisitions that have occurred since January 1, 2001, the date of transition to IFRS, goodwill (positive and negative) represents the difference between the purchase price and the fair value of the identifiable net assets of acquired businesses at the date of acquisition. In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP. The classification and accounting treatment of business combinations that occurred prior to January 1, 2001 has not been reconsidered in preparing the Group’s opening IFRS balance sheet at January 1, 2001 (see note 18). Goodwill is stated at cost less accumulated amortization and impairment losses. F- 90
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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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The Board of Directors IT Holding S
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REPORT OF THE AUDITORS The Board of
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IT HOLDING S.p.A. CONSOLIDATED BALA
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Acquisition of Subsidiary During 20
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IT HOLDING S.P.A. NOTES TO THE CONS
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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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