14MB - Pirelli

—— gains arising on sale transactions of properties made by one joint venture to other joint
ventures or associates are recognized to the extent of the lower of the Group’s interest in
the buyer company compared to that of the seller company, that is, only to the extent of the
gain realized with third parties;
—— gains arising on sales transactions of properties from associates to other associates are
recognized to the extent of the gain realized with third parties;
—— at the time of acquisition of subsidiaries, associates or joint ventures, the price paid is allocated
according to the purchase method in the manner described below:
• determining the cost of acquisition in accordance with IFRS 3;
• determining the fair value of the assets and liabilities acquired (both actual and contingent);
• allocating the price paid to the fair value of the assets acquired and liabilities assumed;
• recognizing any residual amount in goodwill, consisting of the excess of the cost of acquisition
over the net fair value of the Group’s share of the identifiable/assumed net assets
and liabilities;
• immediately recognizing the negative goodwill, if any, directly in the income statement if
the fair value of the net assets acquired exceeds the cost of acquisition.
3. Accounting policies
INTANGIBLE ASSETS
Intangible assets with a finite useful life are measured at cost less accumulated amortization
and accumulated impairment losses.
Amortization starts when the asset is available for use or is able to function as management intends,
and ceases on the date on which the asset is classified as held for sale or is derecognized.
The gains or losses from the sale or disposal of an intangible asset are determined as the difference
between the net proceeds from the sale and the carrying amount of the asset.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s interest
in the identifiable assets and liabilities acquired as of the date of acquisition.
Any negative difference (negative goodwill) is recognized in the income statement at the date
of acquisition. In the absence of a standard or a specific interpretation on the subject, in the
event of the acquisition of minority interests in companies already controlled, the difference
between the acquisition cost and the carrying amount of assets and liabilities acquired is recognized
as goodwill, according to the “Parent entity extension method”. Any negative difference
is recognized in the income statement.
Goodwill is tested for impairment in order to identify any impairment losses at least annually
or whenever there are indications of an impairment loss, and is allocated to cash-generating
units for this purpose.
Upon the disposal of a part or the whole of a previously acquired company to which goodwill
has been allocated, the corresponding residual amount of goodwill is taken into account in the
determination of the gain or loss on sale.
ANNUAL FINANCIAL REPORT 2008
325