Tiscali 2003 Annual Report Download - page 61

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5) Translation of items denominated in foreign currency
Balance sheet items not denominated in Eur are converted at the exchange rate in force at the end of the financial year. Items on
the profit and loss account are converted into euro at the average exchange rate for the financial year. Any differences between
the results for the financial year calculated using average exchange rates and those obtained using year-end exchange rates, and
any changes in the value of assets/liabilities resulting from fluctuations in exchange rates during the financial year are recorded
under shareholders' equity on the "currency translation reserve" line. Detailed information on the currencies used in the prepara-
tion of the consolidated annual accounts is provided in another section of these notes.
6) Accounting policies
a) General criteria
Accounting principles and policies have been applied in a uniform manner to all consolidated companies. The accounting
policies adopted in preparing the consolidated annual accounts are the same as those used by the parent Company Tiscali
S.p.A., and conform to those stipulated in the aforementioned prevailing regulations. These criteria have been integrated and
interpreted in accordance with the accounting principles issued by the Italian association of chartered accountants, supple-
mented by IFRS accounting principles where appropriate. The same criteria are used as in previous years, particularly with
regard to valuations and continuity in applying the same principles. The valuation of balance sheet items was performed
based on general criteria of prudence and competence, on a going concern basis. With regard to this, please note the follo-
wing.
a.1) Going concern basis
These accounts were prepared on a going concern basis, since, as referred to in the Report on operations, the prospects for
the sector in which Tiscali operates and its competitive position, mean that the Group’s target of achieving a better financial
structure is well within its grasp, as the business plans, the disposals programme for non-core assets and the refinancing
strategy indicate. In particular, attainment of the targets set out in the strategic plan, including the disposals, represent a
key factor in the development of Tiscali’s financial position and the stability of its businesses and finances; this would con-
sequently ensure the Group is able to redeem the next bond issues falling due and comply with the related covenants, and
will be able to raise the finances necessary to sustain growth, particularly in broadband services.
The Company’s position as a going concern is also supported by the substantial improvement in results achieved in 2003,
and by the expectations of further substantial and ongoing advances in 2004 and subsequent years, as set out in the busi-
ness plan, which was drawn up based on assumptions that take into account the information currently available on market
trends. Specifically, the Company’s plans point to the generation of cash flow from the second half of 2004 (last four months)
and the attainment of a net profit in 2005.
a.2) Other general criteria
For the purposes of accounting entries, the economic substance of transactions prevails over their legal form. Investments are the-
refore booked at the time of payment. Profits are included only if they are recorded within the period under review, while provi-
sion is made for risks and losses that may come to light at a later date. Miscellaneous items included under single accounting
entries have been valued separately. Assets destined for long-term use have been listed under non-current assets.