PARENT COMPANY >
FINANCIAL STATEMENTS AND EXPLANATORY NOTES
304
| 2012 annual report prysmian group
The preparation of financial statements requires management
to apply accounting policies and methods which, at times,
rely on subjective judgements and estimates based on past
experience and assumptions deemed to be reasonable and
realistic according to the circumstances. The application of
these estimates and assumptions influences the amounts
reported in the financial statements, meaning the statement
of financial position, the income statement, the statement
of comprehensive income and the statement of cash flows,
as well as the accompanying disclosures. Ultimate amounts,
previously reported on the basis of estimates and assumptions,
may differ from original estimates because of the uncertain
nature of the assumptions and conditions on which the
estimates were based.
The following is a brief description of the accounting policies
that require the management of Prysmian S.p.A. to exercise
greater subjectivity of judgement when preparing estimates
and for which a change in underlying assumptions could have a
significant impact on the financial statements.
(a) Provisions for risks and charges
Provisions are recognised for legal and tax risks and reflect the
risk of a negative outcome. The value of the provisions recorded
in the financial statements against such risks represents the
best estimate by management at that date. This estimate
requires the use of assumptions depending on factors
D. ESTIMATES AND ASSUMPTIONS
which may change over time and which could, therefore,
have a significant impact on the current estimates made by
management to prepare the Company’s financial statements.
(b) Impairment of assets
In accordance with the accounting standards applied by the
Group, property, plant and equipment, intangible assets
with finite useful lives and equity investments are tested for
impairment. Any impairment loss is recognised by means
of a write-down, when indicators suggest it will be difficult
to recover the related net book value through use of the
assets. Verification of these indicators requires management
to make subjective judgements based on the information
available within the Company and from the market, as well
as on past experience. In addition, if a potential impairment
loss is identified, the Company determines the amount
of such impairment using suitable valuation techniques.
Correct identification of impairment indicators as well as
the estimates for determining the amount of impairment
depend on factors which can vary over time, thus influencing
judgements and estimates made by management.
Irrespective of the existence of potential impairment indicators
or otherwise, all intangible assets not yet ready for use must
be tested for impairment once a year.
(c) Depreciation and amortisation
The cost of property, plant and equipment and intangible
