Tiscali 2007 Annual Report Download - page 126

dered by reference to completion of the specific transaction.
Amounts relating to other financial periods are recorded under
other current liabilities as deferred income.
2.12 Financial income and charges
Interest received and paid is recognised using the effective inter-
est method.
2.13 Taxes
Income tax expense for the year includes the tax currently
payable.
The tax currently payable is based on taxable income for the year.
Taxable income differs from the result reported in the income
statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. Liability for current tax
is calculated using tax rates applicable at the balance sheet date.
3. Critical decisions in applying accounting stan-
dards and in the use of estimates
In the process of applying the accounting standards disclosed in
the previous section, Tiscali’s directors made some significant de-
cisions in view of the recognition of amounts in the financial state-
ments. The directors’ decisions are based on historical
experience as well as on expectations associated with the reali-
sation of future events and considered reasonable under the cir-
cumstances.
3.1 Accounting estimates and relevant assumptions
Provisions for risks and charges
Provisions for risks and charges related to potential legal and tax
liabilities are established following estimates performed by direc-
tors on the basis of judgements developed by the Company’s
legal and tax advisors, concerning the charges that are reason-
ably deemed to be incurred in order to settle the obligation. If in
relation to the final result of such judgements the Company is
called upon to fulfil an obligation for a sum other than that esti-
mated, the related effects are reflected in the income statement.
Equity investments
Impairment testing, with particular regard to equity invest-
ments, is performed annually as indicated under point 2.7 “Im-
pairment of assets”. The ability of each unit (investment) to
produce cash flows sufficient to recover the value recorded in
the financial statements is determined on the basis of forecast
economic and financial data of the company concerned or any
subsidiaries. The development of such data, as well as the de-
termination of an appropriate discount rate, requires a signifi-
cant use of estimates.
Determination of the Fair Value
In relation to the instrument or the financial statement item to be
valued, management identifies the most appropriate method, re-
ferring as far as possible to objective market data. In the absence
of market values, i.e. listings, valuation techniques are used with
reference to those most commonly used in practice.
3.2 New accounting standards
On 3 March 2006, the IFRIC issued interpretational document
IFRIC 9 –
Subsequent assessment of underlying derivatives in
order to specify that a company must assess whether underlying
derivatives must be separated from the primary contract and
recognised as derivative instruments as of the moment that the
company becomes party to the contract. Subsequently, unless
contractual conditions are modified to produce significant effects
on cash flows that would otherwise be required under contract,
said assessment may not be implemented again. The adoption of
this interpretation has not led to the recording of significant ac-
counting effects.
On 20 July 2006, the IFRIC issued the interpreting document
IFRIC 10 –
Interim financial statements and losses in value in
order to specify that the loss in value recorded on goodwill and on
specific financial assets during an intermediate period cannot be
reinstated in a subsequent intermediate period or in the annual
financial statements. The adoption of this interpretation did not
lead to any accounting effect.
On 2 November 2006, the IFRIC issued the interpreting docu-
ment IFRIC 11 –
IFRS 2-Transactions on Group shares and own
shares
in order to specify the accounting treatment for payments
based on shares, which the company must acquire own shares
in order to satisfy, as well as payments based on shares of a
Group company (for example the parent company) allocated to
employees of other Group companies. The adoption of this inter-
pretation did not lead to the recording of any significant account-
ing effects on outstanding plans.
In August 2005, the IASB issued the new accounting standard
IFRS 7 –
Financial instruments: supplementary information and
a complementary amendment to IAS 1 –
Presentation of the fi-
nancial statements: supplementary information relating to the
share capital.
IFRS 7 requires supplementary information regard-
ing the recognition of financial instruments concerning the per-
formance and the financial position of a company. This
information incorporates certain requisites previously included in
accounting standard IAS 32 –
Financial instruments: disclosure in
the financial statements and supplementary information
. The
new accounting standard also requires information regarding the
level of exposure to risk deriving from the use of financial instru-
ments, and a description of the objectives, policies and proce-
dures implemented by management to handle such risks. The
amendment to IAS 1 introduces requirements relating to infor-
mation to be provided on company capital. The Company
adopted IFRS 7 in the 2007 financial statements.
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