47.1. Accounting policies
FOREWORD
Maire Tecnimont S.p.A. is a joint stock company established in Italy at the Register of the Companies in Rome. In compliance with the provisions of the first paragraph of article 4 of Legislative Decree No. 38/2005, the Statutory Financial Statements of Maire Tecnimont S.p.A. (separate financial statements), being the Company listed on the Italian Regulated Market, have been edited in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure set forth by article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and the Counsil of July 19, 2002.
These Financial Statements are denominated in Euro as this is the currency in which most of the Company’s transactions are performed.
47.2. Accounting formats
The accounting formats and the information disclosure e contained in these financial statements have been drafted in compliance with the International Accounting Principle IAS 1, as envisaged by CONSOB Communication No. 1559 No. 6064293 issued on July 28, 2006. Balance sheet items have been classified as current and non-current assets; Income Statement items have been classified by nature.
The Cash Flow Statement has been prepared using the indirect method, adjusting profit for the year for non-monetary components.
The Statement of Changes in Shareholders’ Equity shows total profits (loss) for the year and other changes in shareholders’ equity
47.3. Accounting Principles, amendments and interpretations applicable in
2008
On November 30, 2006 IASB issued the accounting principle IFRS 8 – Operating Segments – which is effective for annual periods beginning on or after January 1, 2009 at it replaces IAS 14 – Segment Reporting. The new accounting principle requires the Company to prepare the sector information on the basis of the elements utilized by the management in its operating decision making process and therefore it requires the identification of operating segments in accordance with the internal reporting which is subject to frequent revisions by the management with the purpose of allocating the financial resources to the various business segments and analysing their respective performances. The Company has not adopted this accounting principle in these Financial Statements.
On October 13, 2008 IASB issued an amendment to IAS 39 – Financial Instruments: Recognition and Measurement and IFRS 7 – Financial Instruments: additional disclosure enabling, under specific circumstances, the reclassification of certain financial assets other than derivatives from the accounting category "valued at fair value through the Income Statement”. The amendment enables, furthermore, the transfer ot borrowings and receivables from the accounting category "held for sale" to the accounting category "held until maturity", if the Company intends and has the capability to hold such instruments during a defined future period. The amendment is applicable from July 1, 2008, therefore its adoption has not implied the recognition of any impact in these Financial Statements as the Company has not carried out any of the reclassifications allowed by this principle.
Maire Tecnimont S.p.A.
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On July 5, 2007 the IFRIC issued the interpretation of IFRIC 14 “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction, on IAS 19 – the limit on a defined benefit asset, the minimum funding requirements and their interaction retrospectively applicable from January 1, 2008. The interpretation draws the general guidelines on how to determine the limit amount set by IAS 19 for the recognition of defined benefit assets and provides and explanation on the accounting effects caused by the existence of a minimum funding requirement clause. The adoption of such interpretation has not generated material accounting impacts in these Financial Statements.
On November 30, 2006 IFRIC issued the interpretation IFRIC 12 “Service Concession Arrangements” defining the recognition and valuation criteria to be adopted for the agreements between the public and private sectors in relation to the development, financing, management and maintenance of grantors’ infrastructure assets under concession arrangements. The provisions of IFRIC 12 are effective from January 1, 2008. Finally, it is to be noted that in relation to what has been already illustrated in the Explanatory notes to the Financial Statements at 31 December 2007, the European Commission has not introduced any changes with respect to the homologation process of interpretation IFRIC 12, referred to the concession arrangements’ recognition and measurement methods between a public sector body and a private operator (with a specific reference to the recognition and measurement methods for disposable assets, the management of such assets, as well as the restoration and maintenance obligations on these assets). In relation to this matter, even though the IFRIC is effective from January 1, 2008, the Company Maire Tecnimont S.p.A. shall adopt the IFRIC 12, if applicable, starting from the date to be set when the its homologation occurs consistently with the general IFRS application rules envisaging their application conditional to their homologation and publication on the European Union Official Bulletin.
47.4. Accounting Principles, amendments and interpretations not yet
applicable or not applied by the Group before the effective date
On September 6, 2007 IASB issued an updated version of IAS 1 – Presentation of Financial Statements which must be applied from January 1, 2009. The new version of the principle requires that all changes generated through transactions with shareholders are presented in a Statement of Changes in Shareholders’ Equity. All transactions carried out with third parties (comprehensive income), instead, must be represented in a single statement of comprehensive income or in two separate statements (Income Statement and Comprehensive Income Statement). In any event, the changes generated by transactions with third parties cannot be represented in the Statement of Changes in Shareholders’ Equity. Among the other components of the net profit there are: the change in Cash flow hedge reserve, change in actuarial gains and losses, change in retained earnings, actuarial and conversion losses, and the net result on financial activities held for sale. As of today, the changes in these components result exclusively from the analysis of the changes in shareholders’ equity in which they are included. The adoption of this principle will not generate any impacts on the measurement of the financial statements’ items.
On January 17, 2008 the IASB issued an updated version of IFRS 2 “Share-based payments”, which specifies the standards to be adopted when equity instruments assigned to employees are cancelled and that the vesting of the equity instruments assigned may be contingent solely upon the satisfaction of conditions related with the services rendered by the employee or company performances. The provisions of the new version of IFRS 2 apply from January 1, 2009.
On January 10, 2008, the IASB issued an updated version of IFRS 3 Business Combinations, and it has amended IAS 27 — Consolidated and Separate Financial Statements. The principal amendments to IFRS 3 refer to the elimination of the obligation to measure the fair value of each subsidiary’s asset and liability at any subsequent acquisition in the event of progressive acquisition of subsidiaries. In these cases, the goodwill shall be determined as the difference
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between the value of the Investments before the acquisition, the amount due and the net asset value. Moreover, in the event that the Company does not purchase 100% of the investment, the minority interest in the shareholders’ equity can be evaluated at the fair value or by using the method illustrated above in IFRS 3. the updated version of the principle also envisages the recognition in the income statement of all costs stemming from the business aggregation and the recognition of the liabilities for conditional payments on the date of the acquisition. In the amendment to IAS 27, instead, the IASB stated that the changes in shareholdings which do not imply a loss of control must be treated as equity transactions and, therefore, taken to equity. Furthermore, it has been stated that when a controlling company is giving up control over a subsidiary even though it continues to own a minority stake, the latter shall be evaluated at the fair value and any potential gains or losses stemming from the loss of control shall be recognized in the income statement. Finally, the amendments to IAS 27 envisage that all losses attributable to the minorities shall be allocated to the portion of shareholders’ equity attributable to them even if those are exceeding their respective stakes in the subsidiary’s equity. The new provisions shall be applied starting from January 1, 2010. At the date of these Financial Statements, the competent bodies of the European Union have not yet completed the homologation process required for the application of the principle and the amendment.
On March 29, 2007 the IASB issued an updated version of IAS 23 “Financial charges”, establishing that the capitalization of financial charges stemming from the acquisition, construction or production of an asset (requiring a significant period of time before the asset is ready to use or to be sold); with respect to the previous version such financial charges can not be recognized on a accrual basis in the income statement any more. Therefore, it is mandatory to capitalize the financial charges directly attributable to the acquisition, construction or production of an asset any time a long period of time is necessary in order to make it available to the intended use or for sale. The principle shall be applied to the financial charges on capitalized assets starting from January 1, 2009.
On June 28, 2007 the IFRIC has issued the interpretation IFRIC 13 “Customer Loyalty Programs” defining the recognition and valuation criteria for the customer loyalty programs offered by companies to their clients, which benefit from prizes, discounts, or free products through their purchases. In detail, the interpretation establishes the allocation of a portion of the revenue earned on the sale to award credits and their measurement at fair value. The provisions of IFRIC 13 become effective from January 1, 2009.
At present Maire Tecnimont S.p.A is analysing the accounting standards and interpretations set forth above and assessing whether their adoption will have a material impact on the financial statements.
47.5. Valuation criteria
THE KEY VALUATION CRITERIA ADOPTED WITH RESPECT TO THE CONSOLIDATED FINANCIAL