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FINANCIAL STATEMENTS AND EXPLANATORY NOTES
300
| 2012 annual report prysmian group
B.3
INVESTMENTS IN SUBSIDIARIES
B.4
TREASURY SHARES
Investments in subsidiaries are carried at cost, less any
impairment losses.
If there is specific evidence of impairment, the value of
investments in subsidiaries, determined on the basis of cost,
is tested for impairment. This involves comparing the carrying
amount of the investments with their recoverable amount,
defined as the higher of fair value less costs to sell, and value
in use.
If an investee has distributed dividends, the value of the
investment is tested for impairment in at least one of the
following circumstances:
· the carrying amount of the investment in the separate
financial statements exceeds the carrying amount in the
consolidated financial statements of the investee’s net
assets, including any associated goodwill;
· the dividend exceeds the total comprehensive income of
the investee in the period to which the dividend refers.
If the recoverable amount of an investment is less than its
carrying amount, then the carrying amount is reduced to the
Treasury shares are reported as a deduction from equity. The original cost of treasury shares and revenue arising from any
subsequent sales are treated as movements in equity.
recoverable amount. This reduction represents an impairment
loss, which is recognised through the income statement.
For the purposes of impairment testing, the fair value of
investments in listed companies is determined with reference
to market value, regardless of the size of holding. The fair
value of investments in unlisted companies is determined
using valuation techniques.
Value in use is determined using the “Discounted Cash
Flow - equity side” method: this involves calculating the
present value of estimated future cash flows generated by a
subsidiary, including cash flows from operating activities and
the consideration arising from the investment’s ultimate sale,
net of the financial position at the valuation date.
If the reasons for a previously recognised impairment loss
cease to apply, the carrying amount of the investment is
reinstated but to no more than its original cost, with the
related revaluation recognised through the income statement.
