In preparing the attached tables and the relative notes, it was necessary to use estimates and assumptions in order to calculate, in particular, the provision for returns of published products, provisions for writedowns of assets, for risks, employee benefits and taxation, and the value of intangible assets (including goodwill).
These estimates are constantly reviewed and any effects are recognised in the income statement.
The data in the final balance could differ, even significantly, from these estimates as a result of possible changes to the factors taken into consideration when the estimates were first made.
The most significant accounting estimates that involve a high level of subjective judgement are outlined below:
Goodwill and intangible assets
A check is carried out to verify if there has been a reduction in the value of goodwill and intangible assets by comparing the carrying value of the Cash Generating Unit and its recoverable value, represented by the higher of its fair value and value in use. This process includes the use of methods such as discounted cash flow and its relative assumptions.
Bad debt reserve
The ability to recover debts is calculated by taking into account the collectibility risk, the length of time they have been outstanding and the losses sustained in the past on similar debts.
Reserve for inventory provisions
The company estimates the amount of provisions for inventories on the basis of specific analyses of the saleability of finished products and their relative rotation rating, and, for work being carried out, by taking into account the eventual risk that it will not be completed.
Future returns
In the publishing sector it is accepted practice that books and magazines that have not been sold are returned to the publisher, in accordance with pre-established conditions.
Therefore, at the end of every year the company estimates the quantity that will presumably be returned during the following year. This estimation is based on historical experience and also takes individual print runs into account.
Risk reserve
Provisions relating to judicial, fiscal and arbitration disputes are based on complex estimates that take into account the probability of losing the disputes.
Employees’ leaving entitlements and termination indemnities
Provisions connected to reserves for employees are calculated on the basis of actuarial estimates, so variations in such estimates may have significant effects on these reserves.
Income taxes
Income taxes (both current and deferred) are calculated in each country where the Group operates and are based on prudent interpretations of current fiscal laws.