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4.10 Foreign Currency Transactions and Balances
The Group’s functional currency is the euro. Consequently, any transactions in currencies other than the euro are considered as “foreign currency”
and are recognised according to the prevailing exchange rate on the date the transactions are performed.
Cash assets and liabilities denominated in foreign currencies are converted into the functional currency at the prevailing exchange rate on the date
of each consolidated balance sheet. Any gains or losses thus revealed are recognised directly in consolidated comprehensive profit and loss.
4.11 Classification of Financial Assets and Debts into Current and Non-Current
In the attached consolidated balance sheet, financial assets and debts are classified on the basis of their maturity; in other words, those with a
maturity date equivalent to or less than twelve months are classified as current and those with a maturity date exceeding this are non-current.
4.12 Income and Expenses
Income and expenses are recognised on an accrual basis, i.e. when the real flow of goods and services they represent occurs, irrespective of the
moment when the monetary or financial flows deriving from them arise.
More specifically, income is calculated at the fair value of the consideration to be received and represents the amounts to be collected for the goods
and services delivered within the ordinary framework of operations, subtracting any discounts and taxes.
Income and expenses arising from interest are accrued on the basis of a financial timing criterion depending on the outstanding principal to be
received or paid and the effective interest rate that applies.
In accordance with IAS 18, the Group follows the criterion of booking sales of real estate under construction and, consequently, any profits from the
same at the moment the significant risks and rewards of such real property are transferred to the buyer and the buyer has taken effective control
over the property.
As a general rule and following the principle of correlation between income and expenses, any commission fees for sales staff and others of a general
nature (sales representatives, advertising, etc.) not specifically attributable to real estate developments, though solely connected to the same,
incurred from the moment the developments are initiated up to the moment the sales are recognised are entered into the books under the “Other
current assets” item of the assets side of the consolidated balance sheet, so that they may be attributed to expenses at the moment the sales are
recognised, provided the margin from the sale agreements entered into pending entry into the books exceeds the amount of such costs at the end
of each year.
4.13 Official Subsidies
Group companies follow the criteria set out below in recognising official subsidies:
- Non-reimbursable capital subsidies (connected with assets) are valued at the amount granted, recognised as deferred income and taken into
profit and loss in proportion to the depreciation of the assets financed by such subsidies during the financial year.
- Operating subsidies are recognised as income at the moment of their accrual.
4.14 Corporate Income Tax
The cost of the year’s income tax is calculated through the sum of the current tax resulting from applying the tax rate to the taxable income for the
year and then applying the relevant tax adjustments according to the law plus any changes in deferred tax assets and liabilities.
Deferred tax assets and liabilities include temporary differences, being any amounts expected to be payable or recoverable due to differences
between the carrying amounts of the assets and liabilities and their tax value, as well as tax loss carry-forwards and any credits resulting from
unapplied tax deductions. Said amounts are recognised by applying to the relevant temporary difference or credit the tax rate at which they are
expected to be recovered or settled.
In some countries, the tax rate varies depending on whether a transfer of assets is made. In these cases, the Group’s policy consists of applying the
effective tax rate at which they are expected to be recovered or settled. In the opinion of the Directors of the Group, the deferred tax thus calculated
covers the amount which may eventually be settled, if any, in the foregoing case.
Deferred tax liabilities for all taxable temporary differences are recognised, except for those in which the temporary difference arises from the initial
recognition of goodwill amortisation of which is not tax-deductible or the initial recognition of other operating assets and liabilities which do not
affect either the tax or accounting result.
Deferred tax assets identified as temporary differences are recognised only if it is deemed probable that the consolidated entities will make sufficient
tax profits in the future to realise them and they do not come from the initial recognition of other assets and liabilities in a transaction which does
not affect either the tax or accounting result. Other deferred tax assets (tax loss carry-forwards and tax credits) are recognised only if it is likely that
the consolidated companies will make sufficient tax profits in the future to be able to apply them.
At each year-end, deferred taxes (both assets and liabilities) are reviewed in order to verify that they remain in force and the relevant corrections
are made in accordance with the outcome of the analyses conducted.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
