2004 Annual Report - Benetton Group

Reserve for net exchange differences arising from the conversion of the financial statements
of foreign shareholdings - IAS 21 “Effects of changes in foreign exchange rates” states that
the differences arising from conversion of the financial statements of a foreign consolidated
company must be classified as a separate item in Shareholders’ equity, which is transferred
to the statement of income when the company is sold. The Group has adopted the facility
granted by IFRS 1 to apply IAS 21 on a prospective basis, assuming that, at the date of
transition to IAS/IFRS, the translation reserve is zero.
Business combinations - IFRS 1 states that, at the transition date, the choice can be made not
to apply IFRS 3 “Business Combinations” retroactively to company combinations which took
place before the date of transition to IAS/IFRS. The Benetton Group intends to make use of
this exemption and adopt IFRS 3 on a prospective basis, as from January 1, 2004, even though
the effects of its application at the transition date would be minimal.
Compound financial instruments - IAS 32 “Financial instruments: disclosure and presentation”
states that, where there are compound financial instruments, the liability and shareholders’
equity components must be separated. IFRS 1 allows the non-separation of the two
components if the liability element no longer exists at the transition date. The Benetton Group
does not hold any compound financial instruments.
Financial instruments accounted for in accordance with previous standards - IAS 32 and 39
“Financial instruments: recognition and measurement” applies to annual financial statements
of financial years commencing as from January 1, 2005, however its early adoption is
encouraged and the Benetton Group intends to apply this standard on a prospective basis
as from January 1, 2004.
Considering the designation of financial instruments as “instruments valued at fair value with
variations attributed directly to the statement of income” or as “available for sale” - IAS 39
allows entry of a financial instrument at the time of its first entry either in the category
“financial assets and liabilities valued at fair value with changes attributed directly to the
statement of income” or in the category “assets available for sale”. IFRS 1 allows these
designations to be made at the date of transition to IAS/IFRS and the Benetton Group is
making use of this exemption.
Derecognition of financial assets and liabilities - IAS 39 requires recognition in the opening
balance sheet at January 1, 2004 of financial assets and liabilities, other than derivatives, which
were previously written off following application of previous accounting principles. However,
IFRS 1 allows application of the principle of “derecognition” on a prospective basis and
therefore applicable to financial assets and liabilities, not consisting of derivatives, purchased
after the transition date. The Benetton Group does not have any cases which would lead to
adoption of the exemption in question.
Share-based payments - IFRS 2 “Share-based payments” applies to annual financial statements
of years commencing as from January 1, 2005, however its early adoption is encouraged and
the Benetton Group intends to apply the standard on a prospective basis as from the 2004
financial year.
D I R EC TO R S’ R E P O RT
43