4. Resultados
4.2. Tabulación de los resultados de la encuesta:
Foreword
The Consolidated Financial Statements of the Group at December 31, 2005 is the first finan- cial statements prepared under IFRS.
The Espresso Group adopted IFRS from January 1, 2005 while the transition date is January 1, 2004. The Group has therefore prepared an opening balance sheet at the transition date applying all mandatory exceptions and some of the exemptions to the retroactive application of IFRS allowed under IFRS 1.
Until December 31, 2004, the Consolidated Financial Statements of the Espresso Group were prepared in accordance with Italian Law, as interpreted and integrated by the Italian Accoun- ting Profession Board and by documents and remarks issued by the Italian Accounting Orga- nization (referred to jointly as “Italian GAAP”). For certain aspects such principles differ from IFRS. To conform to IFRS, the Group modified some accounting methods and valuation prin- ciples used in the preparation of consolidated financial statements for previous years.
The notes that follow describe the choices made by the Group with regard to exemptions to the retroactive application of IFRS allowed under IFRS 1, in addition to the reconciliation and description of effects of the transition from Italian GAAP to IFRS required by Consob. The following reconciliation schedules and related notes were prepared with such end: 1. Shareholders’ Equity
Reconciliation of the Shareholders’ Equity at the following dates:
l date of transition to IFRS (January 1, 2004);
l closing date of the last financial statements prepared under Italian GAAP (December 31,
2004);
l date from which IAS 32 and IAS 39 have been adopted (January 1, 2005).
2. Net Profit
Reconciliation of net profit for the following periods:
l last financial year for which the financial statements were prepared under Italian GAAP
(2004 financial year).
The Espresso Group appointed independent auditors PricewaterhouseCoopers SpA, that also audited the financial statements at December 31, 2004, to carry out a full audit of the prelimi- nary IFRS reconciliation schedules at January 1, 2004, December 31, 2004 and January 1, 2005.
Adjustments were made in accordance with IFRS in force at the date of approval of the pre- sent report.
IFRS reconciliation schedules are prepared exclusively for the purposes of the transition in the context of the preparation of the first full financial statements under IFRS approved by the European Commission and lack therefore comparative data and the necessary notes that would be required to provide a full representation of the consolidated operating, financial and inco- me performance of the Espresso Group under IFRS.
With respect to the appendix relating to the transition to IFRS included in the Consolidated Financial Statements at June 30, 2005, to provide a better representation of the financial posi- tion and operating performance of the Group, a number of reclassifications of balance sheet
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and income statement items for the various periods considered were carried out. Main reclas- sifications performed are described below.
Balance Sheet
l at January 1, 2004, €63.2 million was reclassified from item “IFRS reserve” to item “Equi- ty reserves” with the aim of representing under the “IFRS reserve” exclusively the impact of the transition to IFRS of the Parent Company. At the same date, €67.8 million was reclassified from item “Retained earnings” to “Net profit (loss)”, and €111 million was reclassified from “Retained earnings” to “Equity reserves”;
l part of item “Trademarks”, amounting to €1.2 million, was reclassified from “Other intan- gible assets” to “Intangible assets with an indefinite useful life”;
l accrued income and liabilities, of an amount not significant, were recorded directly as a
reduction and/or increase of the item to which they relate.
These reclassifications relate to all periods under exam (January 1, 2004, December 31, 2004 and January 1, 2005). As a result of the application of IAS 32 and 39, issue discounts and expenses relating to bond issues (classified under item “Other current receivables”) at January 1, 2005, were recorded as a reduction of the same (€2.2 million).
Income Statement
l “Changes in inventories” were reported separately in the Income Statement;
l the €4.8 million receivable write-down was reclassified from “Depreciation, amortization and write-downs” to “Other operating charges”;
l other personnel costs amounting to €1.1 million were reclassified from accruals to provision for risks and charges (“Other operating charges”) to “Personnel costs”.
Opening balance sheet
As required under IFRS 1, a consolidated balance sheet was prepared at the date of transition to IFRS (January 1, 2004) in which:
l all assets and liabilities whose recording is required under IFRS, including those not requi-
red under Italian GAAP, were recorded;
l all assets and liabilities whose recording is not allowed under IFRS, were excluded;
l assets and liabilities were recorded at the value that would have applied in case IFRS had
been applied retrospectively;
l items previously reported in the financial statements in a manner different from that provi-
ded under IFRS were reclassified.
The effect of the adjustment to IFRS of beginning balances of assets and liabilities was recor- ded in the Shareholders’ Equity in the “Reserve for the conversion to IFRS” and under “Retai- ned earnings (loss carry-forwards)”, net of the related tax effect.
In the preparation of the opening Consolidated Balance Sheet at January 1, 2004, the Espres- so Group decided to take advantage of the following exceptions to the retroactive application of IFRS:
1. business combinations, acquisition of investments in affiliates and joint control: the retroactive
application of IFRS 3 (“Business combinations”) requires the review of the recording of all aggregations of companies (mergers, acquisitions, contributions, spin-offs, etc.) carried out in the past from the initial incorporation of the company. IFRS 1 allows the choice not to apply IFRS 3 retroactively, or to apply the same from a date set by the company. The exemption
applies also to all past acquisitions of shares in affiliated companies and joint ventures. The Espresso Group decided to take advantage of the exemption to the retroactive application of IFRS 3 for the acquisition of shares in affiliated companies and joint ventures occurred befo- re January 1, 2004;
2. value at which property, plant and equipment and intangible assets are recorded: the retroactive
application of IAS 16 (“Property, plant and equipment”), IAS 38 (“Intangible assets”) and IAS 40 (“Investment property”) requires – for those tangible and intangible assets are recorded at cost – the restatement of the historical cost, and the accumulated depreciation and write-downs. The Espresso Group decided to apply the “estimated cost” with reference to part of land and buildings on the basis of expert valuations prepared by independent appraisers.
There lacking an active market for intangible assets, the Group could not benefit from the application of the “estimated cost” in the valuation of the same;
3. employee benefits (Employee termination indemnity and other retirement benefits): in the recor-
ding of defined benefit plans (which include also the Employee termination indemnity) IAS 19 allows the suspension of actuarial gains and losses that do not exceed a certain limit (“corri- dor approach”). The retroactive application of IAS 19 requires the quantification of actuarial gains and losses arising over time from the initial incorporation of the company for all person- nel employed at the date of the transaction with the aim of determining the ones to be recor- ded and those to be suspended. IFRS 1 allows the use of the corridor approach.
The Espresso Group opted for the application of the corridor approach. Actuarial gains and losses at the date of the transition are recorded in full, with a parallel recording under Share- holders’ Equity;
4. financial instruments (recognition and measurement): IAS 39 requires the designation of a
financial instrument to a specific category to be carried out at the time of its first recording. As permitted under IAS 39, IFRS 1 allows the designation designation to be carried out at the tran- sition date.
The Espresso Group decided to apply IAS 32 and 39 starting from January 1, 2005 and opted for the exemption to the restating of the related comparative data. The designation of finan- cial instruments was therefore carried out at the date of adoption of IAS 32 and IAS 39;
5. stock options: the exemptions to stock options allows to wave the application of IFRS 2 for
stock options granted before November 7, 2002 (date of publication of the principle) and for stock options granted after November 7, 2002 and maturing before January 1, 2005. The early application of the principle is however allowed only when the company has disclosed the fair value of stock options granted.
The Espresso Group opted for the exemption to the application of IFRS 2 for stock option plans issued before November 7, 2002 and for stock options granted after such date and expi- ring before January 1, 2005.
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