163
Special purpose entities
During 2007 the Group defined and adopted a trade
receivables securitization programme for a number of Group
companies. The accounting policies adopted by the Group to
present the impact of this programme on the consolidated
financial statements at 31 December 2012 are described
below.
The securitization programme involves the weekly transfer
of a significant portion of trade receivables by some of the
Group’s operating companies in France, Germany, Italy, the
United Kingdom and the United States. This programme
started on 30 January 2007 and was originally due to end on 31
July 2012 but has been extended for another twelve months.
These operating companies transfer their receivables,
directly or indirectly, to an Irish special purpose entity
(Prysmian Financial Services Ireland Ltd), set up solely for
the securitization programme. The Irish company purchases
these receivables using available liquidity, as well as
financing received from vehicle companies, sponsored by
the programme’s organising and underwriting banks, which
issue Commercial Paper in the form of A-1/P-1 rated credit
instruments backed by the receivables, which are then
placed with institutional investors. Subordinated loans
from the Group’s treasury companies are also used to fund
the purchase of these receivables. In accordance with the
provisions of SIC 12 - Consolidation - Special Purpose Entities
(SPEs), the Irish special purpose entity has been included in
the scope of consolidation of the Prysmian Group because
it was created to accomplish a narrow and well-defined
objective. Until effectively collected, receivables transferred to
the SPE are recognised in the Group’s consolidated financial
statements, together with the payables owed by the SPE to
third-party lenders. Group companies can be identified as the
SPE sponsors, meaning the companies on whose behalf the
SPE was created.
Translation of foreign company financial
statements
The financial statements of subsidiaries, associates and
joint ventures are prepared in the currency of the primary
economic environment in which they operate (the “functional
currency”). The consolidated financial statements are
presented in Euro, which is the Prysmian Group’s functional
and presentation currency for its consolidated financial
reporting.
The rules for the translation of financial statements
expressed in currencies other than the Euro are as follows:
• assets and liabilities are converted using the exchange
rates applicable at the end of the reporting period;
• revenues and expenses are converted at the average rate
for the period/year;
• the “currency translation reserve” includes both the
translation differences generated by translating income
statement items at a different exchange rate from
the period-end rate and the differences generated by
translating opening equity amounts at a different exchange
rate from the period-end rate;
• goodwill and fair value adjustments arising from the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the period-
end exchange rate.
If a foreign entity operates in a hyperinflationary economy,
revenues and expenses are translated using the current
exchange rate at the reporting date. All amounts in the
income statement are restated by applying the change in
the general price index between the date when income and
expenses were initially recorded in the financial statements
and the reporting date. Corresponding figures for the previous
reporting period/year are restated by applying a general
price index so that the comparative financial statements are
presented in terms of the current exchange rate at the end of
the reporting period/year.
As at 31 December 2012, none of the consolidated companies
operated in hyperinflationary economies.
