Gobierno electrónico (E-GOVERNMENT).

Marketable securities are represented by financial assets having a fixed maturity which the company has the intention and the ability to hold to maturity and as such carried at the amor- tized cost. For a more detailed analysis of accounting principles regarding financial assets, see note 3.12.

3.8 Inventories

Inventories are recorded at the lower of the acquisition cost, determined applying the weighted average cost method, and the net realizable value. The cost is represented by the fair value of the price paid and any other cost that may be attributed, with the exception of interest expen- ses. The net realizable value is represented by the estimated sale price under normal conditions, net of completion costs and selling expenses. Write-downs are reversed in subsequent years when the reasons for their recording cease to exist.

3.9 Trade receivables

Trade receivables are recorded at the fair value of future cash flows, written-down for losses in value.

3.10 Contract work in progress

Contract work in progress is represented by specific projects being completed on behalf of others.

In the case of projects for which the outcome can be estimated in a reliable manner, contrac- tual revenues and related costs are recorded under the stages of completion method. The per- centage of completion is determined according to the ratio between costs and time employed in the activity carried out at the closing date of the accounts and total costs estimated to the

completion. When it appears probable that total costs will exceed contractual revenues, the expected loss is taken to the income statement.

In the case of projects for which a reliable estimate is not available, contractual revenues are recorded in line with costs incurred, provided such costs are expected to be retrieved.

The sum of costs incurred and of profits recorded on each project is compared with invoices issued against the work carried out up until the date of the financial statements. When costs incurred and profits recorded (net of losses) are higher that invoices issued, the difference is recorded among current assets under “Trade receivables”. When invoices issued are higher than the sum of costs incurred and profits recorded (net of losses), the difference is accounted for among current liabilities under “Trade payables”.

3.11 Cash and cash equivalents

Cash and cash equivalents are represented by short-term investments in highly liquid assets that may easily be converted in known amounts of cash posing a minimal risk of fluctuation in value, and by transactions carried out in the context of centralized treasury management. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash, demand deposits with banks, other highly liquid short-term financial assets with an original maturity not exceeding 3 months, and bank overdrafts. For the purposes of the balance sheet, the latter are included among financial payables under current liabilities.

3.12 Financial assets

Financial assets are classified into the following categories: l financial assets at fair value through profit and loss; l financial assets held to maturity;

l loans and receivables;

l available-for-sale financial assets.

The Group carries out the classification of financial assets at the time of acquisition. Financial assets are classified as follows:

l financial assets at fair value through profit and loss, consisting of financial assets acquired primarily with the intent of realizing a gain from short-term trading (over a term no longer than 3 months), or financial assets designated as such from inception;

l financial assets held to maturity, consisting of financial assets having a set maturity and gene- rating a fixed cash flow or one that may be determined, which the Group intends and has the ability to hold to maturity;

l loans and receivables, consisting of financial assets generating a fixed cash flow or one that may be determined, not listed on a market and different from those classified from inception as financial assets valued at fair value, recorded also in the income statement as available-for- sale financial assets;

l available-for-sale financial assets, consisting of financial assets other than the above or those designated as such from inception.

Acquisitions and sales of financial assets are recorded at the settlement date. The acquisition cost corresponds to the fair value at the acquisition date, inclusive of transaction costs. After the initial recording, Financial assets valued at fair value, recorded also in the income sta- tement and Available-for-sale financial assets are valued at fair value, while Financial assets held to maturity and Loans and receivables are valued at the amortized cost.

assets valued at fair value, recorded also in the income statement are recorded in the income sta- tement in the year in which they occur. Unrealized gains and losses resulting from fluctuations in the fair value of Available-for sale financial assets are recorded under Shareholders’ Equity. The fair value of financial assets is determined according to listed bid prices or through the use of financial models. The fair value of unlisted financial assets is estimated using specific esti- mation techniques adjusted to the specific condition of the issuer. Financial assets for which the current value cannot be reliably determined are recorded at cost, adjusted downwards for los- ses in value.

At each financial closing date, the presence of factors indicating loss of value is assessed. Los- ses in value accounted for are reversed in case the circumstances that led to their recording no longer exist, with the exception of assets valued at cost.

3.13 Share capital

The share capital is represented by capital underwritten and paid-up.

Costs strictly correlated with the issue of shares are recorded as a reduction of the share capi- tal, provided they are directly attributable to operations involving the same.

3.14 Treasury stock

Treasury stocks are recorded in a specific Shareholders’ Equity reserve. Gains or losses on the purchase, sale, issue or cancellation of treasury stock are not recorded in the income statement. 3.15 Fair value reserves

Fair value reserves include changes in the fair value, net of the related tax effect, of items recor- ded at fair value with compensation in the Shareholders’ Equity.

3.16 Other reserves

Other reserves are represented by specific capital reserves. 3.17 Retained earnings (loss carry-forwards)

Retained earnings (loss carry-forwards) include the part not distributed and not accrued to mandatory reserve (in case of profits) or not balanced (in case of losses), of profits for previous years. The item includes also transfers from other equity reserves freed-up, in addition to the effect of the change in accounting principles and relevant errors.

3.18 Employee benefits Short-term benefits

Short-term employee benefits are recorded in the income statement in the period in which the employment takes place.

Post-retirement benefits

The 2007 Budget Law (Law 296/2006) and related implementation regulations introduced, from January 1, 2007, substantial changes in norms regarding Employee Termination Indem- nities, among which the choice left to workers as to the destination of individual indemnities accruing from such date. In particular, according to the choice made by the worker, indemni- ties accrued from January 1, 2007 will have to be paid out by the company to the pension fund of choice or managed by the company itself (in which case the latter will have to deposit the

related amounts in a treasury account set-up with INPS – the national Social Security Fund – while benefits accrued by the pension fund will be paid out by the employer with the possible subsequent settlement of balances).

These normative changes resulted in the following changes in the accounting treatment of employee termination indemnities:

Accounting treatment prior to reform

According to international accounting principles, employee termination indemnities were included among defined benefit plans, for which it was not sufficient to determine the value of these indemnities in accordance with the method provided for by the Italian Civil Code, but it was necessary to estimate the overall liability for each employee up to the termination of his or her employment with the company. International accounting principles required also to discount such liability to its present value using an appropriate rate of interest.

The following were used in the calculation:

1) projected growth rates of pay increases through which, based on the current pay of each employee, future pay progression estimates were made for each employee (projections based on past average pay growth, inflation, likeliness of career advancements, bonuses, etc.) 2) demographic indexes based on which projections on the timing of future liability payments were made (age of employees, contribution seniority, likeliness of continuation of employ- ment/termination of work with the company, etc.)

The value of future employee termination indemnities was therefore determined through the use of an actuary, considering projected future pay progression, subsequently discounting such value to its present value.

Such calculation was carried out at the end of each quarter, and differences emerging from pre- vious calculations were recorded in the income statement according to their nature:

1) service cost: discounted value of accruals (personnel costs);

2) interest cost: financial effect of the discounting of the provision (financial charges);

3) actuarial gain/loss: changes in the value of employee termination indemnities due to adju- stments to the actuarial assumptions (personnel costs);

Accounting treatment after the reform

According to the mentioned reform introduced by the 2006 Budget Law, employee termination indemnities accrued up to December 31, 2006 will continue to fall under “defined benefit plans”, while indemnities accruing after such date are treated as “defined contribution plan”. In calculating employee termination indemnities accrued up to December 31, 2006, however, contrary to the past, actuaries regarding future pay increases are no longer used and only demographic actuaries are applied. The current value of the provision thus determined is the- refore lower than the related amount calculated using pre-reform rules, as, according to the new calculation method, the service costis no longer calculated, and only the interest costand the actuarial gain(loss) are included. In application of the above changes, the company resta- ted the value of employee termination indemnities at December 31, 2006, and recorded the dif- ference emerged over its value calculated under the previously applied method (so-called cur- tailment) in the income statement.

Employee termination indemnities accrued after December 31, 2006 and paid out to other enti- ties by companies with more than 50 employees are treated by the same as “defined contribu- tion plans”, as in this case all obligations of the company are fulfilled with the periodical pay-

ment of indemnities to other entities. The related discounted-back accruals are also in this case no longer recorded in the income statement (service costs), but only actual funds paid out to outside pension funds chosen by individual employees or those paid out to INPS (national social security fund), calculated pursuant to article 2120 of the Italian Civil Code, are recor- ded among personnel costs.

Defined benefit plans

Employee termination indemnities (limited to the share accrued up to December 31, 2006) and Fixed indemnity for managers of newspapers are determined by independent actuaries to esti- mate the amount of the future benefits that the employees have accrued at the balance sheet date. Considering that changes introduced in norms regulating Employee Termination Indem- nities involved the recording of actuarial gains and losses (previously not recorded as part of debt) directly in the income statement, the method formerly used, i.e. the “corridor approach”, was abandoned in favor of the direct recording in the income statement of all actuarial effects. Defined contribution plans

The Company participates in defined contribution plans contributing to mandatory, contrac- tual or voluntary public or private pension plans. As already mentioned, Employee Termina- tion Indemnities paid out, according to workers’ choices, to the different pension plans or to the separate treasury service offered by INPS, are included in the above category. The payment of contributions extinguishes the obligation of the Company towards its employees. Contribu- tions constitute therefore costs for the period in which they are due.

Financial asset-based compensation

The Company recognizes additional benefits to certain top managers through plans based on financial instruments.

In particular plans adopted by the Company provide for the awarding of stock options or the attribution of rights to beneficiaries of extraordinary bonuses contingent on the achievement of the stock market price by the shares (phantom stock options).

Stock Options

The cost of such operations involving shares, recorded in the income statement among person- nel costs, is calculated based on the fair value of options at the time at which they are assigned. The cost is recorded in the period included between the date at which the options are assigned and that at which they become exercisable, and is recorded also under Shareholders’ Equity. The fair value of the options thus determined is not updated or reviewed at the end of each accounting periods.

When options are exercised before or at expiration, the respective value recorded under Share- holders’ Equity is reclassified under the “Share premium reserve”. Whenever options expire unexercised, on the contrary, the related amount is reclassified under “Retained earnings (loss carry-forwards)”.

In the transition to IFRS, the Group took advantage of a specific waiver and has not applied the above principles to stock option plans assigned before November 7, 2002.

Phantom stock options

culated based on the fair value of options at the time at which they are assigned. The cost is recorded in the period included between the date at which the rights are assigned and that at which they become exercisable, and is recorded also under the related liability item (i.e. Sun- dry personnel provisions).

Until the liability is cancelled, the fair value is recalculated at each accounting date and at the date of the actual outlay, recording all changes in the income statement.

3.19 Provisions for risks and charges, potential assets and liabilities

Provisions for risks and charges are accrued against possible liabilities whose amount and/or timing is uncertain and whose fulfillment requires the use of financial resources. Accruals are made exclusively when there exists an actual obligation, either legal or implicit, towards third parties that requires the use of financial resources, and whenever a reliable estimate of the obli- gation can be made. The accrual recorded represents the best estimate of the liability relating to the fulfillment of the obligation at the date of the financial statements. Accruals made are reviewed at each accounting date and adjusted to the best available estimate.

Where the payment of the obligation takes place beyond normal payment terms and the discounting effect is relevant, the amount accrued is represented by the present value of expec- ted future payments needed to extinguish the obligation.

Potential gains and losses are not recorded in the financial statements, though adequate infor- mation about the same is provided.

3.20 Financial liabilities

Financial liabilities are recorded initially at the fair value of amounts received or to be paid, net of transaction costs, and subsequently carried at the amortized cost.

3.21 Derivative instruments

Derivative contracts are recorded in the balance sheet at fair value. The recording of differen- ces in the fair value varies according to the purpose of the derivative instrument (speculative or hedging) and the nature of the risk hedged (fair value hedge or cash flow hedge).

In the case of contracts designated as speculative, changes in the fair value are recorded direc- tly in the income statement.

In the case of contracts designated as hedging contracts, the Company documents the relation- ship with the instrument hedged at the time it enters into the contract. The documentation includes the identification of the hedging contract, the item or operation hedged, the nature of the risk hedged, the criteria with which the effectiveness of the hedging contract will be eva- luated, and the related risk. The effectiveness of the hedge is evaluated by comparing fluctua- tions in the fair value or the cash flow of the instrument hedged with fluctuations in the fair value or the cash flow of the hedging instrument. The effectiveness of the hedge is evaluated both at the start of the operation and regularly throughout the duration of the hedge. The eva- luation is in any case carried out at least at each accounting date. More specifically, the hedge is considered as efficient when the fluctuation in the fair value or the cash flow of the instru- ment is “almost entirely” offset by the fluctuation in the fair value or cash flow of the hedging instrument and results are included in an interval between 80% and 125%.

Fair Value Hedgeinstruments are accounted for by recording in the income statement changes in the fair value of the hedging instrument and the instrument covered, regardless of the valua- tion criteria adopted for the latter. Adjustments to the book value of hedged financial instru-

ments generating interest are amortized in the income statement over the residual term of the asset/liability hedged using the effective interest rate method.

Cash Flow Hedge instruments are accounted for by suspending under Shareholders’ Equity the portion of the change in the fair value of the hedging instrument which is recognized as effec- tive, while recording in the income statement the ineffective part. Changes recorded directly under Shareholders’ Equity are released to the income statement in the same year or in the years in which the asset or liability hedged influences the income statement.

The effect on the financial statements of the termination of a hedge contract are recorded dif- ferently for Fair Value Hedges and Cash Flow Hedges. In the case of Fair Value Hedges the underlying instrument recorded in the financial statements ceases to be hedged from the date at which the hedging contract is terminated and the instrument is thus again valued according to the method used in absence of a hedge. In case of financial instruments valued at the amor- tized cost, the difference between the valuation at the fair value of the risk covered and the amortized cost at the date of the termination of the hedge-accounting period, is amortized over the residual life of the financial instruments based on rules used in the calculation of the effec- tive rate of interest. In the case of Cash Flow Hedges, the gain or loss suspended in the Share- holders’ Equity remain suspended until the transaction takes place, when it is no longer pro- bable or it is no longer expected to be carried out, or when flows originally hedged have an