Tiscali 2007 Annual Report Download - page 76

mentary pension types acquire the characteristic of “Plans with
definite contribution”, while the quotas assigned to staff sev-
erance indemnity provision acquire the nature of “Plans with
definite performances”.
Furthermore, the law changes taking place starting from 2007
implied a new calculation of actuarial assumptions, and of the
consequent methods used to calculate staff severance indem-
nities, whose effects were directly ascribed to the income
statement.
2.14 Provisions for risks and charges
Provisions for risks and charges relating to potential legal and
tax liabilities are established following estimates performed by
directors on the basis of judgements developed by the Group
legal and tax advisors, concerning the charges that are rea-
sonably deemed to be incurred in order to settle the obliga-
tion. If in relation to the final result of such judgements the
Group is called upon to fulfil an obligation for a sum other
than that estimated, the related effects are reflected in the
income statement.
2.15 Remuneration plans in the shape of capital investments
The Group pays additional benefits to some members of the
top management and employees by means of capital invest-
ment plans (stock option plans). Those plans are a compo-
nent of the beneficiaries’ remunerations.
The cost is the fair value of the stock options at the date of
allocation, and for accounting purposes, it follows the rules
fixed by “IFRS 2 – Payments based on shares”; the cost is
reported in the income statement with countervalue relating
directly to the shareholders’ equity.
2.16 Revenue recognition
Revenues from sales of services are recognised net of dis-
counts, rebates and bonuses in the period in which the serv-
ices are rendered by reference to completion of the specific
transaction. In particular, for revenues from internet access
services (‘narrowband’ and ‘broadband’) and voice services,
recognition in the income statement is based on the actual
traffic produced at the reference date and/or periodic service
rental payable at that date.
Revenues related to the activation of broadband services
(ADSL), consistent with the relevant costs capitalised among
intangible assets, are booked to the income statement on a
straight-line basis in relation to the minimum legal duration
of customer contracts, normally 12 months. Amounts relat-
ing to other financial periods are recorded under other cur-
rent liabilities as deferred income.
The revenues originating from the sale of IRU (Indefeasible
Rights of Use) are acknowledged per quota, depending on
the duration of the concession, while any components which
may be identified separately, whose fair values may be calcu-
lated, are recorded in the revenues on the basis of the nature
of the performance or disposal.
2.17 Financial income and charges
Interest received and paid, including interest on bond issues,
is recognised using the effective interest rate method.
2.18 Taxes
Income tax expense for the year includes the tax currently
payable and deferred tax.
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
also excludes items that are never taxable or deductible. Lia-
bility for current tax is calculated using tax rates applicable at
the balance sheet date.
Deferred taxes are taxes likely to become payable or recover-
able on temporary differences between the book value of assets
and liabilities in the financial statements and the correspon-
ding tax bases used in the calculation of taxable income, and
are accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences arising in the Group’s companies and
subsidiaries, except where the Group is able to control rever-
sal of the temporary difference and it is unlikely that the tem-
porary difference will reverse in the foreseeable future.
Deferred tax assets, arising from temporary differences and/or
previous losses, are recognised to the extent that it is proba-
ble that taxable profits will be available in the future against
which deductible temporary differences and/or previous loss-
es can be utilised. The provisions are based on taxable income
likely to be generated in light of the approved business plans.
Such assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition
(other than in a business combination) of other assets and
liabilities in transactions that affect neither the accounting
result nor taxable income. The book value of deferred tax
assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer likely that sufficient taxable
income will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates expected to apply in
the period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the income statement,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with under
equity.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
75