Tiscali 2008 Annual Report Download - page 124

As from 1 January 2007, the 2007 Finance Act and the related
implementing decrees introduced significant amendments to the
regulation of staff severance indemnities (TFR), including the
worker’s choice regarding the allocation of their accruing TFR to
supplementary welfare funds or to the Treasury Fund managed
by INPS (national insurance institute for social security).
Therefore, as a consequence, pursuant to IAS 19, the
obligation with respect to the social security institute and the
contribution to supplementary pension funds acquire the
nature of Plans with defined contributions, while the quotas
assigned to the staff severance indemnity provision acquire the
nature of Plans with defined benefits.
Furthermore, the legislative changes which took place as from 2007
led to a new calculation of actuarial assumptions, and of the
consequent methods used to calculate staff severance indemnities,
whose effects were directly booked to the income statement.
Remunerative schemes involving interests in the share capital
The Group has assigned certain members of senior
management and employees additional benefits via plans for
interests in the share capital (stock option plans). These plans
are a component of the beneficiaries’ remuneration.
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 a matching balance booked
directly to the shareholders’ equity.
Provisions for risks and charges
Provisions for risks and charges relating to potential legal and tax-
related liabilities are established following estimates made by the
Directors on the basis of appraisals made by the Group’s legal
and tax advisors, concerning the charges that are reasonably
deemed will be incurred in order to settle the obligation. If in
relation to the final result of such appraisals, the Group is called
upon to fulfil an obligation for a sum other than that estimated,
the related effects will be reflected in the income statement.
Treasury shares
Treasury shares are booked to reduce the shareholders’ equity.
Revenue recognition
Revenues are stated to the extent that it is probable that Tiscali S.p.A.
will receive economic benefits and their amount can be determined
reliably; they are stated net of discounts, allowances and returns.
Revenues for the provision of services are recorded in the income
statement with reference to the state of completion of the service
and only when the result of the service can be reliably estimated.
Financial income and charges
Interest income and expense is recognised using the effective
interest rate method.
Taxes
Income taxes for the year include the taxation 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 will be taxable or deductible in other years and it
also excludes items which will never be taxable or deductible.
The liability for current tax is calculated using tax rates
applicable at the balance sheet date.
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.
Accounting estimates and relevant assumptions
Provisions for risks and charges
Provisions for risks and charges relating to potential legal and tax-
related liabilities are established following estimates made by the
Directors on the basis of appraisals made by the Group’s legal
and tax advisors, concerning the charges that are reasonably
deemed will be incurred in order to settle the obligation. If in
relation to the final result of such appraisals, the Group is called
upon to fulfil an obligation for a sum other than that estimated,
the related effects will be reflected in the income statement.
Equity investments
Impairment testing, with particular regard to equity investments,
is performed annually as indicated under point 7.5.2.7 Impairment
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
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