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 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. Communication expenses Communication expenses, which include advertising, public relations and visual display expenses, are expensed as incurred. Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease expense. Financial income (charges) Financial income (charges) comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on fund invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognized in the income statement. Interest income is recognized in the income statement as it accrues, taking into account the effective yield on the asset. Dividend income is recognized in the income statement on the date that the dividend is declared. The interest expense component of finance lease is recognized in the income statement using the effective interest rate method. Income taxes Income taxes on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statements except to the extent that is relates to items recognized directly to equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred taxes are provided, using the liability method, to reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect in each of the relevant jurisdictions when such differences are expected to reverse. The F- 95
IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2002 effect of changes in the statutory tax rate is reflected in the statement of income in the period of such changes. Deferred tax assets and liabilities have been offset only when they relate to the same tax jurisdiction. A valuation allowance is provided against net deferred tax assets, which are not considered probable of realization based on historical and expected profitability of the individual subsidiaries. Such assets are recognized when realized or when, based on expected future results, it becomes probable that they will be realized in future periods. Segment reporting A segment is a distinguishable component of the Group’s business that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Net income per share Basic net income per share is calculated by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income for the period by the weighted average number of common shares outstanding during the period adjusted for the effects of all potentially dilutive shares (i.e. employee stock options). Cash flow statement The cash flow statement has been prepared applying the indirect method. The cash and cash equivalents in the cash flow statement comprise the balance sheet item cash at banks and in hand and the bank overdrafts and short-term loans forming part of the current liabilities. Cash flows in foreign currencies have been translated at estimated average exchange rates. Income and expenses in respect of interest, dividends received and taxation on profits are included in the cash flow from operating activities. Expenses for Opening or Modernizing Stores Expenses for opening or modernizing stores under lease contracts are capitalized under tangible 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. Expenses for opening or modernizing stores are depreciated over the remaining duration of the lease contract. All other expenditure is recognized in the income statement as an expense as incurred. Additional information The companies listed below are consolidated using the line-by-line method: Consolidated companies Registered office Share capital % of direct % of indirect Pettoranello di (In Euros unless otherwise indicated) ownership ownership IT HOLDING S.p.A. (Parent company). Molise (IS)—I 12,293,700 IBEX 2001 S.p.A. ................................... Milan—I 100,000 90.00% ITF S.p.A................................................. Milan—I New York—NY— 5,200,000 80.00% ITF USA Inc............................................ USA Pettoranello di USD 500,000 100.00% ITTIERRE S.p.A..................................... Molise (IS)—I Pettoranello di 33,540,000 100.00% GENTRYPORTOFINO S.p.A. .............. Molise (IS)—I Pettoranello di 100,000 100.00% ELITE S.r.l. ............................................. Molise (IS)—I 46,481 100.00% F- 96
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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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