Tiscali 2009 Annual Report Download - page 94

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of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation, under financial payables. Lease
payments are divided into their capital and interest elements. Financial charges are directly booked to the
income statement for the year.
Assets held under finance leases are depreciated using the straight-line method based on their estimated
useful life, in the same manner as owned assets, or over the lease term if shorter and only if there is no
reasonable certainty of redeeming the asset considering the lease expiry terms.
Moreover, as for asset disposal and backdating operations on the basis of financial lease contracts, the
accomplished capital gains are deferred for the duration of contracts or the residual life of the asset (if
lower).
Operating lease payments are booked to the income statement as costs on an accruals basis.
Impairment of assets
Goodwill, intangible assets with an unspecified useful life and assets in process of formation are subject
to an impairment test each year or more frequently if there is indication of impairment. The book value of
intangible assets with an unspecified useful life and of property, plant and machinery, is checked each time
there is indication that the asset has suffered impairment. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment. Where it is not possible
to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of
the cash Generating Unit (CGU) to which the asset belongs. The recoverable amount is the higher between
the ‘fair value’ less sales costs and its utilisation value. When assessing the utilisation value, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments on the value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its book value, the
latter is written down to its recoverable amount. The relevant impairment is booked to the income statement
under write-downs. If the reasons for impairment are considered to no longer apply in the current year,
the book value of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable
amount, but not beyond the net book value that would have been determined had no impairment been
recognised for the asset in previous years. An impairment reversal is booked to the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. Considering the circumstances and
characteristics of the Group’s assets, the cost refers to direct materials. The cost is calculated by using the
average cost method. The net realisable value is the selling price less the costs considered necessary for
achieving the sale.
Financial instruments
Loans and receivables
Group receivables are stated in the items “other non-current financial assets”, “receivables from customers”,
“other receivables and other current assets” and “other current financial assets”, and include guarantee
Consolidated Financial Statements and Explanatory Notes