The Benetton Group Annual Report 1996

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1996
The consolidated financial statements have been prepared in conformity with Chapter III of
Decree 127/1991 of April 9, 1991, which implements the EC VII Directive. The notes to the consolidated
financial statements explain, analyze and, in some cases, supplement the data reported on the face of
the financial statements and include information required by article 38 and other provisions of
Decree 127/1991. Additional information is also provided in order to present a true and fair view of the
financial and operating position of the Group, even where this is not required by specific legislation.
In order to assist the reader of the financial statements in understanding the Group’s financial
performance during the three year period ended December 31, 1996, the Group has presented in
appendix 3 the consolidated statements of income for each of the three years in the period ended
December 31, 1996 and in appendix 2 the consolidated balance sheets as of December 31, 1995 and
1996 in a format consistent with an international format.
Unless otherwise specified, amounts indicated in these notes are expressed in millions of Italian Lire.
1. Activities of the Group
Benetton Group S.p.A. the Parent Company, and its subsidiary companies (collectively the "Group")
primarily manufacture and market fashion apparel in wool, cotton and woven fabrics.
The manufacture of finished articles from raw materials is primarily undertaken in Italy, partly within the
Group and partly using subcontractors, whereas marketing is carried out through an extensive sales
network both in Italy and abroad. This network consists of sales representatives and specialty stores that
are almost exclusively independently owned.
2. Form and content of the consolidated financial statements
The consolidated financial statements and related notes have been translated into English from the
original version in Italian. They have been prepared in accordance with the accounting principles
established by the Italian Accounting Profession, which may differ in certain respects from the principles
generally accepted in other countries.
The consolidated financial statements of the Group include the financial statements as of
December 31, 1996 of Benetton Group S.p.A. and all the Italian and foreign companies in which the
parent company holds, directly or indirectly, the majority of the voting rights. They also include the
accounts of some 50%-owned companies over which the Group exercises a dominant influence. The
companies included within the scope of consolidation are listed in appendix 1.
The financial statements utilized for the consolidation are those prepared for approval at the
stockholders' meetings. The financial statements of foreign subsidiaries have been reclassified, where
necessary, for consistency with the format adopted by the parent company.
The consolidated financial statements have been adjusted to comply with the accounting policies laid
down by Decree 127/1991, those recommended by the Italian Accounting Profession and, in the
absence thereof, by those established by the International Accounting Standards Committee (I.A.S.C.),
consistently applied throughout the Group. In addition, the financial statements of minor subsidiaries
located in highly inflationary countries are adjusted to reflect changes in the purchasing power of the
local currencies.