Tiscali 2007 Annual Report Download - page 70

Explanatory notes
Tiscali S.p.A. is a limited company incorporated under the
laws of the Republic of Italy at the Cagliari Companies’ Reg-
ister. The main activities of Tiscali and its subsidiaries are
described in the economic and financial analysis section of
the report on operations.
The financial statements are presented in Euro (EUR) which is
the currency used to conduct most of the Group’s operations.
Foreign activities have been included in the consolidated finan-
cial statements according to the principles detailed below.
These financial statements were prepared on the assumption
that the company is a going concern and is operating normal-
ly, in that the Group prospects are considered fully coherent
with a balanced economic and financial position as forecast
in the business plans. In reference to Tiscali’s competitive sce-
nario and sector characteristics, availability of financial
resources for supporting the development plans and repaying
the financial debts falling due remain essential for the busi-
ness continuity. During 2007, important re-financing agree-
ments were entered into with Banca Intesa SanPaolo and JP
Morgan, and a “sale & leaseback” transaction was concluded
on the Cagliari property, which together with the proceeds deriv-
ing from the disposals in the Netherlands, Germany and the
Czech Republic, as well as the capital increase taking place
at the beginning of 2008, made it possible to achieve a more
balanced financial position. With this context, the Group’s abil-
ity to generate positive cash flows and operating results remains
of primary importance, being a condition which significantly
influences the evolution of Tiscali’s financial position as well
as the reaching of the goals in the 2008-2012 plan, and, there-
fore, its financial, equity and economic equilibrium.
1. Format and content of accounting statements
The 2007 consolidated financial statements were drawn up by
following both the International Accounting Standards (“IFRS”)
issued by the Accounting Standards Board (“IASB”) and rat-
ified by the European Union, and the measures issued in con-
formity with Article 9 of Italian Legislative Decree no. 38/2005.
IFRS include also all the reviewed international accounting
standards (“IAS”) and all the interpretations by the Interna-
tional Financial Reporting Interpretations Committee (“IFRIC”)
previously called Standing Interpretations Committee (“SIC”).
The consolidated financial statements are composed of account-
ing statements (Income Statement, Balance Sheet, Statement
of changes in consolidated shareholders’ equity, and Cash Flow
Statement), with explanatory notes. The Income Statement was
drawn up in line with the minimum contents fixed by IAS 1 –
Presentation of Financial Statements – with costs assignment
by nature; the Balance Sheet was drawn up by following the
scheme pointing out division of “current/non-current” assets
and liabilities; the Cash Flow Statement was drawn up by fol-
lowing the indirect method. The 2006 Cash Flow Statement
was reclassified so as to make it comparable with the 2007
Cash Flow Statement.
As from the financial year 2007, with subsequent adaptation
of 2006 Income Statement, the intermediate result “gross oper-
ating margin” is no longer pointed out, in order to follow the
example income statement scheme proposed by IAS 1 more
strictly. Furthermore, the income statement item “stock option
plan costs” was introduced. Those costs were not present in
the financial year 2006. The operating costs of Pipex (EUR
23.3 million) considered with non-recurrent character were
assigned to restructuring costs, in accordance with the inte-
gration and restructuring plan started after the acquisition and
currently going on.
In conformity with IFRS 5, and with the necessary require-
ments, the income statements of the assets destined to be
sold, especially the ones in the Netherlands, Germany and
Czech Republic, were recorded under the item of the consol-
idated income statement “results of the disposed of or des-
tined to be transferred assets”, in relation to both the finan-
cial years 2007 and 2006, attached to these financial state-
ments for comparative purpose.
2. Accounting standards
2.1 General standards
The consolidated financial statements were prepared in com-
pliance with the International Financial Reporting Standards
(IAS/IFRS). The main accounting standards are detailed below.
These standards were applied consistently to all periods pre-
sented.
Preparation of the financial statements requires management
to make accounting estimates and in certain cases assump-
tions in the application of accounting standards. The areas
where assumptions and estimates are significant to the finan-
cial statements are disclosed in note 3 of this section.
2.2 Basis of consolidation
The consolidation area includes the parent company Tiscali
S.p.A. and the companies over which Tiscali – either directly
or indirectly – has the power to govern the financial and oper-
ating policies so as to obtain economic benefits from their activ-
ities. In the specific circumstances relating to Tiscali, control
involves the majority of voting rights exercisable at ordinary
shareholders’ meetings of the companies included in the con-
solidation area.
Subsidiaries are fully consolidated from the date on which con-
trol is transferred to the Group and are de-consolidated from
the date on which control ceases.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
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