The Benetton Group Annual Report 1996

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As those proceedings continue, a separate arbitral proceeding initiated by BINV is pending in The Hague. BINV contends in this second arbitral proceeding both that it satisfied any obligations it may have had to negotiate in good faith regarding an extension of the 1986 licensing agreement and that it is entitled to substantial awards of compensatory and other damages from Eco and Bulova regarding conduct occurring during and since the expiration of that agreement. BINV submitted its Statement of Claim on April, 1996 and Eco and Bulova subsequently asserted substantial counterclaims for damages. A hearing on the preliminary questions of the applicability of art. 85 of the EU Treaty and choice of law took place in December 1996 and the parties are waiting for a decision by the arbitral panel. BINV also anticipates that the arbitral proceedings will continue for a lengthy period. 31. SUBSEQUENT EVENTS In March 1997, Benetton Group S.p.A. entered into a collaboration agreement with the Inditex Group, one of Spain's largest garment manufacturer-distributors with an extensive network of directly-operated stores in its local and other European markets. An equal joint venture to be formed under the accord will market garments bearing the Zara label in Italy, via a new chain of retail stores. At a meeting held on April 29, 1997 the stockholders authorized the Board of Directors (pursuant to Article 2420 of the Italian Civil Code and Article 7 of the Articles of Association) to issue bonds up to a maximum of Lire 500 billion, both in the Italian and international markets. The proceeds of the issue, which may take place on one or more occasions over three years, are to be applied to possible investments and reformulating the Group’s debt program. The Board was authorized to determine the rate of interest and the term (up to a maximum of 7 years). At the same meeting the shareholders resolved upon a one-for-twenty-five bonus share issue, which will be carried out at the end of June 1997. This issue will raise the paid-in capital from Lire 87,276,862,500 to Lire 90,767,937,000 and the issued shares from No. 174,553,725 to No. 181,535,874.
32. RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES The Group's accounting policies that differ significantly from accounting principles generally accepted in the United States of America (“US”) are described below: Differences which have an effect on net income and Stockholders' equity (a) Revaluation of Fixed Assets and Trademarks In 1991 and prior years, certain categories of property, plant and equipment and trademarks were revalued to amounts in excess of historical cost. This procedure, which was authorized by Italian law, was allowed under Italian accounting practice to give consideration to the effects of local inflation. Revaluations were credited to stockholders' equity and revalued assets are depreciated over their remaining useful lives. Accounting principles in the US do not permit the revaluation of such assets. The reconciliation to accounting principles in the US eliminates the effect of the revaluation. As of December 31, 1996, the residual gross amount of revaluation was Lire 13,683 million for fixed assets and Lire 4,430 million for trademarks. Surplus from monetary revaluation of assets reserve, amounting to Lire 46,202 million, represents the original revaluation effected in accordance with Italian and Spanish Law and still subject to taxation in case of distribution. The 1991 revaluation resulted in an asset revaluation of Lire 27,104 million for legal and tax purposes and a Lire 4,030 million revaluation for consolidated financial reporting purposes (considering the partial offsetting of the revaluation with the reversal of excess depreciation on the same fixed assets reflected as adjustment in the consolidated financial statements and prior years consolidating entries related to purchase price allocation). In order to maintain a record of the amount of asset revaluation for legal and tax purposes, Lire 23,074 million was transferred from other reserves to "surplus from monetary revaluation of assets". In 1996, a Spanish subsidiary restated its tangible fixed assets by Lire 1,210 million in a monetary revaluation in accordance with local legislation (Royal Decree 2607/96). The increase in surplus from monetary revaluation of assets reserve, amounting to Lire 1,174 million, represent the original net revaluation effected in accordance with Spanish Law. The Lire 8,848 million adjustment in the reconciliation of stockholders' equity represents the remaining excess of revaluations for financial reporting purposes and differs from the 46,202 million Lire "surplus from monetary revaluation of assets" in the statement of stockholders’ equity because: a) Revaluations made for legal purposes (and subject to taxation in case of distribution) ?? but not for consolidated financial reporting purposes, as noted above. b) Depreciation on the revalued assets. c) Sales of revalued assets. (b) Purchases and Sales with Parent Company The Group has entered into several significant purchases and sales of companies with its parent, Edizione Holding S.p.A., and an affiliate of Edizione. The prices paid were based upon independent appraisal. The Group recorded the assets of purchased businesses at their acquisition value. Goodwill was charged directly to consolidated equity. In the case of sales transactions, the difference between carrying value and selling price was reflected as a gain in the accompanying financial statements. Under US generally accepted accounting principles, transactions between members of a "controlled group" should not result in gains or losses, or increases in asset carrying values. Accordingly, gains recognized on these transactions have been reversed in the accompanying reconciliation.
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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
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Signori Azionisti, nell’esercizio
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Gli investimenti I programmi di inn
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Consolidated financial statements a
Page 19: The Benetton Group The Benetton Gro
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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 62 and 63: 23. ACCRUED EXPENSES AND DEFERRED I
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
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Page 74 and 75: The following tables summarize the
Page 76 and 77: Differences which do not have an ef
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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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