185000000 IT Holding Finance SA

IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004
Associates
Associates are those entities over which the Group has significant influence but not control, generally
accompanying a share holding of between 20% and 50% of the voting rights. Investments in associates are initially
recognized at cost and subsequently accounted for by the equity method of accounting, whereby, the Group’s share
of its associates’ post-acquisition profits or losses is recognized in the Group’s income statement and the Group’s
share of its associates’ post-acquisition movements in reserves is recognized in reserves. The cumulative postacquisition
movements are adjusted against the carrying value of the investment.
At December 31, 2004 the carrying value of investments in associates and the Group’s share of associates’ results
were not material, therefore associates and the Group’s share of associates’ results have not been disclosed
separately in the financial statements. At December 31, 2003 there were investments in associates.
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.
Foreign currency
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”). The consolidated financial
statements are presented in euros, which is the Company’s functional and presentation currency.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated into the functional currency at the exchange rate prevailing at that date.
Foreign exchange differences arising on the settlement of such transactions and on translation are recognized in the
income statement, except when arising from derivative financial instruments qualifying as cash flow hedges, in
which case they are deferred in equity.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into
the functional currency at the exchange rates prevailing at the dates the values were determined.
Financial statements of foreign operations
Financial statements of foreign companies whose functional currency is not the Euro are translated into Euro as
follows:
• assets and liabilities including goodwill and fair value adjustments arising on consolidation are translated at the
exchange rates ruling at the balance sheet date;
• income and expenses are translated into Euro at the average rates for the year;
• foreign exchange differences arising on translation are recognized as a separate component of equity. Upon
disposal of the foreign operation, accumulated foreign exchange differences relative to that operation are
recognized in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits as well as all highly liquid investments
purchased with an original maturity of three months or less. The investments included in cash and cash equivalents
are reported at their fair market value.
Cash and cash equivalents are determined in the same way both for the purposes of the balance sheet and the cash
flow statement.
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