ANNUAL REPORT

2008 Group’s Consolidated Annual Report – Explanatory Notes
in compliance with IAS 39, are valued at fair value with recognition of value differences to
income statement, while payables for the acquisition of rights – considered monetary items –
are adjusted to the exchange rate at period end, in compliance with IAS 21.
Derivative instruments include current financial assets and liabilities entered at fair value.
The fair value of forward contracts on currencies is determined as the discounted difference
between the notional amount valued at the contract forward rate and the notional amount
valued at the fair forward (period end exchange rate calculated at the account date).
The fair value of exchange rate options is calculated using the Black & Sholes method for plainvanilla
options, while the binomial method is used for the Single Barrier Options (with barrier
defined in reasonable times).
With reference to hedging derivatives to hedge interest rate risk, the fair value of interest rate
swaps is calculated using the current value of the expected future cash flows, while the fair
value of collar derivatives is calculated using the Black & Sholes method.
Accounting treatment varies according to the fact that these are designated as hedging
derivatives pursuant to IAS 39.
In particular, for the purpose of hedge accounting, Mediaset considers as hedging derivatives
those financial instruments that hedge against currency exposures connected to commitments
for future purchases of television rights denominated in foreign currency (forecast transaction)
and those to hedge the exchange rate risk for which both the relationship between the
derivative instrument and the hedged item and the likelihood/effectiveness of occurrence of the
forecast transaction are formally documented.
The effective component of the adjustment to fair value of the derivative instrument used and
qualified as hedging derivative is directly recognised to Shareholders’ equity, while the
ineffective component is entered in income statement.
These operations are accounted for through cash flow hedge. According to this rule, the effective
component generating changes in the value of the derivative is entered in a reserve to
Shareholders’ equity. In the event of hedging commitments for the purchase of rights, such
reserve is used to subsequently adjust the recognised value of the asset in the financial statements
(basis adjustment) and in the event of exchange rate risk hedge, such reserve generates a
proportional effect in the income statement at the same time of generation of the relevant cash
flows.
Changes to the fair value of derivative instruments used for financial hedging purposes, that
hedge the risk of changes to the fair value of items entered in the financial statements, in
particular, currency receivables and payables or derivatives that do not qualify as hedging
derivatives, are recognised in the income statement under item “Financial income / loss”.
Revenue recognition
Revenues from sales and services are entered when the relevant risks and benefits are
transferred, which derive from the actual transfer of ownership or completion of the service.
In particular, the Group’s main revenues from sales are entered according to the following
criteria:
� advertising: upon showing of the relevant insert or advertising commercial. Revenues from
advertising sales in exchange of goods (and correspondingly the cost of goods) are adjusted
in order to keep the estimated recoverable value of goods into account;
� goods: upon shipment or delivery. In case of lease o sub-licencing of the use of rights also for
a limited period of time, implying the transfer onto the transferee of the asset’s control, the
relevant revenue is fully recognised when the use of the asset is transferred;
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