185000000 IT Holding Finance SA

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<strong>IT</strong> HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 When the acquisition agreement provides for an adjustment to the purchase consideration contingent on future events, an estimate of the adjustment is included in the cost of acquisition. Any future adjustment of the estimate is recorded as an adjustment of the goodwill. 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. Investments 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 investments capitalized includes the cost of materials and direct labor. Other development expenditure is recognized in the income statement as an expense as incurred. Investments collection development expenditure is stated at cost less accumulated amortization and impairment losses. Investments in collection development costs 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 investments 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 amortized from the date of initial recognition; other intangible assets are amortized from the date they are available for use. F- 91
<strong>IT</strong> HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 The applicable amortization rates 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. Production costs of finished products include the cost of materials, consumables and external manufactures and the portion of all those direct and indirect production costs which may reasonably be attributed to them, excluding financial charges. Purchase or production cost is determined under the average cost method. Investment property Investment property is stated at 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 estimated equal to 33 years. The fair value if the investment property is disclosed in note 16. Trade and other receivables Trade and other receivable are stated at their cost less impairment. Recognition of Factoring Transactions on Receivables The Group finalize transactions for the factoring of trade receivables without recourse. Assets under Italian accounting principles can be derecognized if the legal requirements for the derecognition are satisfied. The transactions finalized by the Group do not meet the derecognition criteria of IAS 39 and therefore the Group continue to recognize the factored trade receivables and recognize a financial liability for the consideration received in the above mentioned factoring transactions. Cash and cash equivalents Cash and cash equivalents comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. The Group considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The investments included in cash and cash equivalents are reported at their fair market value. Impairment The carrying amounts of the Group’s asset, other than investment property, inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. F- 92
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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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