The Benetton Group Annual Report 1996

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23. ACCRUED EXPENSES AND DEFERRED INCOME This caption comprises the following: 12-31-1995 12-31-1996 Accrued expenses: - financial charges 51,896 32,786 - other charges 3,432 1,914 Total accrued expenses 55,328 34,700 Deferred income: - financial income 1,528 6,623 - sponsorships 9,337 17,003 - other income 1,230 467 Total deferred income 12,095 24,093 Premiums on bond issues 587 390 Total 68,010 59,183 Deferred financial income mainly reflects interest deriving from hedging transactions arranged by Benetton International N.V. in connection with warrants attaching to the Lire bond discussed in note 22. 24. COMMITMENTS, CONTINGENCIES, MEMORANDUM ACCOUNTS These mainly include currency to be sold or purchased forward. This account group records the Lire value of commitments deriving from hedging contracts outstanding at the balance sheet date. In response to the volatility in exchange rates in the economic environment, the Group has implemented a strategy to manage the exposure of exchange rate fluctuations on consolidated operations. The Group principally utilizes forward exchange contracts to fulfill this strategy only with substantial and creditworthy multinational financial institutions. Therefore, there are no risks of counterparty nonperformance nor the economic consequences of counterparty nonperformance associated with these contracts. For the most part, the caption reflects transactions opened to hedge foreign currency receivables, firm orders and future sales. Some of those covering future sales were subsequently renegotiated by entering opposite transactions. Other transactions were entered into to hedge the exchange risk on capital invested by Group companies. The estimated fair values and relating contract amounts of the Group’s financial instruments at December 31, 1996 are as follows (in millions of lire): Forward contracts: Fair value Contract amounts Sell currency 3,462,987 3,744,604 Buy currency 1,912,543 2,050,226 Notional amount Forward rate agreements 100,000 Interest rate swaps 328,751 Forward exchange contracts expire from January 1997 through May 1998. Included in forward contracts, sell and buy currencies are respectively Lire 1,552,285 million and Lire 459,544 million of contracts that hedge identifiable foreign currency assets, liabilities, contractual obligations or foreign investments in subsidiary companies. The interest rate swap agreements and forward rate agreements expire within three months and therefore their carrying value approximates fair value. Purchase commitments include contracts to acquire tangible fixed assets. Sale commitments relate to a subsidiary company's contract to sell retail premises.
COMMENTS ON THE PRINCIPAL STATEMENT OF INCOME CAPTIONS (in millions of Lire ) 25. VALUE OF PRODUCTION Revenues from sales and services Revenues from sales of products and services are detailed below: 1995 1996 Sales of core products 2,724,372 2,666,418 Miscellaneous sales 50,601 45,205 (Discounts) (7,388) (8,938) Royalty income 13,642 15,124 Miscellaneous revenues 157,907 153,299 Total 2,939,134 2,871,108 Miscellaneous revenues mainly reflect manufacturing, advertising and promotion services rendered to third parties. Information by geographic area The following information is provided by geographic area: 1994 Italy Europe The Other Inter- Consoli- (excluding Americas countries company dated Italy) (c) (d) transactions Net sales and other revenues (a) 882,744 1,019,478 227,302 658,148 - 2,787,672 Operating income (a) 151,153 175,040 (19,318) 93,841 (11,976) 388,740 Identifiable assets (b) 2,291,554 810,637 163,094 271,880 - 3,537,165 1995 Net sales and other revenues (a) 1,011,727 1,034,665 208,459 684,283 - 2,939,134 Operating income (a) 195,568 182,529 (23,737) 112,833 (23,390) 443,803 Identifiable assets (b) 1996 2,633,545 825,485 143,331 234,718 - 3,837,079 Net sales and other revenues (a) 1,064,201 1,004,175 192,450 610,282 - 2,871,108 Operating income (a) 214,529 110,184 (13,806) 85,060 5,714 401,681 Identifiable assets (b) 2,372,025 1,177,212 147,046 167,979 - 3,864,262 The appreciation of the Lira by more than 8% on average with respect to the principal operating currencies had an adverse influence on 1996 Group revenues. (a) Amounts principally determined by destination. (b) By geographic location. (c) Operating income in the Americas includes in operating results, Lire 2,409 million of loss in 1996 (Lire 15,961 million in 1995 and Lire 5,800 million in 1994) arising from Cosmetics Group; therefore it includes Lire 3,583 million of loss in 1996 (Lire 6,486 million in 1995 and Lire 8,083 million in 1994), arising from subsidiaries operating in countries with hyper-inflationary economies. (d) Identifiable assets in the Americas include the financial assets of Benetton Finance N.V., located in the Dutch Antilles, amounting to Lire 64,380 million as of December 31, 1996 (Lire 37,322 and 16,053 million respectively in 1995 and 1994).
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The Benetton Group Annual Report 19
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Dear Shareholders, in 1996 the Bene
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Manufacturing companies invested su
Page 11: Signori Azionisti, nell’esercizio
Page 14 and 15: Gli investimenti I programmi di inn
Page 17 and 18: Consolidated financial statements a
Page 19: The Benetton Group The Benetton Gro
Page 23 and 24: Management’s discussion and analy
Page 25: Net capital employed Net working ca
Page 28 and 29: Consolidated balance sheet as of De
Page 30 and 31: Consolidated balance sheet as of De
Page 32 and 33: Consolidated statements of income f
Page 34 and 35: Statement of changes in consolidate
Page 36 and 37: Statements of consolidated cash flo
Page 38 and 39: NOTES TO THE CONSOLIDATED FINANCIAL
Page 40 and 41: 4. Accounting policies The accounti
Page 42 and 43: Reserve for employee termination in
Page 44 and 45: OTHER INFORMATION 5. Purchase of su
Page 46 and 47: COMMENTS ON THE PRINCIPAL ASSET CAP
Page 48 and 49: 8. Financial fixed assets Equity in
Page 50 and 51: CURRENT ASSETS 9. Inventories Inven
Page 52 and 53: Differentials on forward transactio
Page 54 and 55: Reconciliation of the stockholders'
Page 56 and 57: 20. RESERVES FOR RISKS AND CHARGES
Page 58 and 59: 22. ACCOUNTS PAYABLE The compositio
Page 60 and 61: Due to other providers of finance A
Page 64 and 65: Sales of core products, by business
Page 66 and 67: Writedowns The "Writedown of curren
Page 68 and 69: Expense This caption includes: 1995
Page 70 and 71: As those proceedings continue, a se
Page 72 and 73: Generally accepted US accounting pr
Page 74 and 75: The following tables summarize the
Page 76 and 77: Differences which do not have an ef
Page 78 and 79: Companies and Groups included withi
Page 80 and 81: Consolidated balance sheets as of A
Page 82 and 83: Consolidated statements of income f
Page 84 and 85: REPORT OF THE BOARD OF STATUTORY AU
Page 87: Information for Stockholders Inform
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The Benetton Group Annual Report 1996

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