14MB - Pirelli

EXTRAORDINARY SESSION CONSOLIDATED FINANCIAL STATEMENT SUSTAINABILITY REPORT DIRECTORS' REPORT PRELIMINARY INFORMATION
PAYABLES
Payables are initially recorded at their fair value, generally represented by the agreed consideration
or the present value of the amount that will be paid.
They are subsequently measured at amortized cost.
Amortized cost is calculated using the effective interest rate method, which is equivalent to the
discount rate which, applied to future cash flows, renders the present value of such flows equal
to the initial fair value.
Payables in currencies other than the functional currency of the individual companies are adjusted
to the year-end exchange rates with a corresponding entry to the income statement.
Payables are derecognized when the specific contractual obligation is extinguished.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
This category of financial assets includes securities purchased principally for resale in the
short term and classified in current assets in “securities held for trading”. They also comprise
financial assets which at the time of initial recognition are designated at fair value through
profit or loss and classified in “other financial assets”.
They are measured at fair value with a corresponding entry to the income statement. Transaction
costs are expensed to the income statement.
Purchases and sales of such financial assets are recognized on settlement date.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include bank and postal deposits and cash and valuables on hand.
PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Provisions for other liabilities and charges include accruals for current obligations (legal or
constructive) deriving from a past event, for the fulfillment of which an outflow of resources
will probably be necessary, the amount of which can be estimated in a reliable manner.
Changes in estimates are recognized in the income statement in the period in which the
change occurs.
If the effect of discounting is material, provisions are presented at their present value.
EMPLOYEE BENEFIT OBLIGATIONS
Employee benefit obligations paid subsequent to the termination of the employment relationship
under defined benefit plans and other long-term benefits are subject to actuarial calculations.
The liability recorded in the financial statements is the present value of the Group’s
obligation, net of any plan assets.
With regard to defined benefit plans, the Pirelli & C. Group elected the option allowed by IAS
19 under which actuarial gains and losses are recognized in equity in full in the year in which
they arise.
For other long-term benefits, actuarial gains and losses are recognized immediately in the income
statement.
The interest cost and the expected return on plan assets are classified in personnel costs.
The costs relating to defined contribution plans are recognized in the income statement when
incurred.
Up to December 31, 2006, the provision for the employees’ leaving indemnity of the Italian companies
(TFR) was considered a defined benefit plan. The rules regarding this provision were changed
by Law 297 dated December 27, 2006 (Italian Budget Law 2007) and subsequent Decrees and Regu-
332 PIRELLI & C. S.p.A. MILAN