Tiscali 2003 Annual Report Download - page 22

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23
In respect of the extension of the amortisation period, an impairment test was carried out to update the valuation of the consoli-
dation difference, based on an analysis of the value of the Group companies to which this item refers. This was carried out using
a discounted cash flow calculation with data taken from the business plans for all business units in each country in which Tiscali
operates. The results showed that the net book value of goodwill pertaining to different countries was much lower than the corre-
sponding value derived from the methodology described above. In addition, the board of directors commissioned a report by an
independent consultant, who confirmed that there was a significant difference between the value of goodwill estimated on the
basis of the business plans for each business unit, and the book value of goodwill recorded for each business unit. The consul-
tant also suggested that an amortisation period of between 10 and 15 years was sustainable for the Group.
Furthermore, from 2005 (but for comparative purposes, from the 2004 accounts), IAS/IFRS accounting principles will be applied,
under which goodwill is no longer amortised. Instead, it is valued each year according to impairment test criteria, for the purpo-
ses of checking the book value and ascertaining whether any write-downs should be recorded. In this context, where there is a
significant difference between the value of goodwill determined by the impairment test and its book value, it is considered appro-
priate to extend the goodwill amortisation period, as other companies in the sector have done.
Thanks to a strong business performance, Tiscali posted a sharp improvement in its bottom-line figure for the year. The Group
made a net loss of EUR 242.4 million, a significant improvement on the loss of EUR 593.1 million posted in 2002.
This result was affected by:
• changes described above relating to the estimates of the remaining useful life of intangible (goodwill) and tangible assets,
which reduced depreciation and amortisation by EUR 142 million, of which EUR 130 million relates to goodwill;
• the booking of deferred tax assets of EUR 51.6 million, relating to the subsidiaries/countries that made a pre-tax profit in
2003 (the Netherlands and South Africa).
The Group’s cash resources totalled EUR 332.5 million at the end of the year, including tax receivables and term deposits, while
net debt stood at EUR 279.6 million. Including liabilities to other lenders, net debt came in at EUR 323.1 million, compared to
EUR 197.7 million at end-December 2002. This is described in more detail later in the report.