The Benetton Group Annual Report 1996

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.