Tiscali 2013 Annual Report Download - page 79

Annual financial report as at 31 December 2013
Date
File Name
Status
Page
-
Annual Report as at 31
December 2013
79
Critical decisions in applying accounting standards 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 decisions in view of the recognition of amounts in the financial
statements. The directors’ decisions are based on historical experience as well as on expectations
associated with the realisation of future events, considered reasonable under the circumstances.
Assessment of whether primary assets reported can be recovered is based on the estimate of income
and financial flows the Group feels it will be able to generate in the future. As more fully described in
the note “Evaluation of the company as a going-concern”, achieving the results set forth in the
business and financial plan, used for the assessment, depends on whether the forecasts and
assumptions contained therein are reached. Some of these variables are beyond the control of the
Directors and the Group management and especially with regards to developments in the
telecommunications market and achieving the growth objectives set in an extremely competitive
market.
Assumptions for the application of accounting standards
Activation costs and customer acquisition costs
The costs incurred for customer activation (Subscriber Acquisition Costs – SACs) were capitalised and
amortised over a period of 36 months.
Losses in value on assets (Impairment)
The impairment test is carried out annually or more frequently during the financial year, as disclosed in
the preceding section, ‘Business combinations and goodwill’. The ability of each ‘unit’ to generate cash
flows such as to recover the goodwill allocated to the unit, is determined on the basis of the economic
and financial data concerning the unit to which the goodwill refers. The development of such data, as
well as the determination of an appropriate discount rate, requires a significant use of estimates
Income taxes
The determination of income tax, in particular with reference to deferred taxes, involves the use of
estimates and assumptions to a significant extent. Deferred tax assets, arising from timing differences
and/or previous losses, are recognised to the extent that it is probable that taxable profits will be
available in the future against which deductible timing differences and/or previous losses 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 timing differences derive 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 assets to be
recovered.
Provisions relating to employees
The provisions associated with employees, and in particular the Provisions for staff severance
indemnities, are determined based on actuarial assumptions. The changes in these assumptions could
have significant effects on these provisions.
Receivable write-down provision
The recoverability of the receivables is assessed taking into account the risk of not collecting them,
their ageing and the significant losses on receivables in the past for similar receivables.
Provisions for risks and charges