The main accounting principles adopted in the preparation of the consolidated financial statements at December 31, 2016 are reported below.
The consolidated financial statements at December 31, 2016 and the tables included in the explanatory notes are prepared in thousands of Euro.
2.1 Basis of preparation
The Consolidated Financial Statements include the Consolidated Statement of Financial Position, the Consolidated Income Statement, the Consolidated Comprehensive Income Statement, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Shareholders’ Equity and the Explanatory Notes.
It should be noted that the following restatements have been made for a better representation of the financial statement figures: i) EBITDA was calculated in 2016 as the difference between total operating revenues and total operating costs, excluding provisions and write-downs. Consequently it was restated for the previous year in order to make the figures comparable; ii) the payable for a surtax on landing fees has been reclassified from "Income tax payables" to "Other payables", with consequent reclassification of the previous year values, for comparison purposes.
As in the 2015 financial statements, IFRS 5 has been applied to the commercial aviation handling sector, its income statement does not contribute to the results of 2016 on every type of cost and revenue line, but is reported in a specific separate line of the income statement called "Discontinued Operations profit/(loss)”; the same treatment is applied to the assets and liabilities connected with the commercial aviation handling sector, reported in specific asset and liability items.
A specific paragraph of these Explanatory Notes, to which reference should be made (Paragraph 5.2 “Discontinued Operations assets, liabilities and profit/(loss)), illustrates the Discontinued Operations’ accounts presented in the Consolidated Income Statement, the Consolidated Statement of Financial Position and the Consolidated Cash Flow Statement.
The Consolidated Financial Statements at December 31, 2016 were prepared in accordance with IFRS in force at the approval date of the financial statements and the provisions of Article 9 of Legislative Decree 38/2005. The term IFRS includes all of the International Financial Reporting Standards, all of the International Accounting Standards and all of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) previously called the Standing Interpretations Committee (SIC) approved and adopted by the European Union.
In relation to the presentation method of the financial statements "the current/non-current" criterion was adopted for the statement of financial position while the classification by nature was utilised for the comprehensive income statement and the indirect method for the cash flow statement.
The Consolidated Financial Statements were prepared in accordance with the historical cost convention, except for the measurement of financial assets and liabilities, including derivative instruments, where the obligatory application of the fair value criterion is required.
The Consolidated Financial Statements were prepared in accordance with the going concern concept, therefore utilising the accounting principles of an operating business. Company Management evaluated that, although within a difficult economic and financial environment, there are no uncertainties on the going concern of the business, considering the existent capitalisation levels and there are no financial, operational, management or other indicators which could indicate difficulty in the capacity of the company to meet its obligations in the foreseeable future, and in particular in the next 12 months. In the preparation of the Consolidated Financial Statements at December 31, 2016, the same accounting principles were adopted as in the preparation of the Consolidated Financial Statements at December 31, 2015 as indicated below. Following the issue on a regulated market of the “SEA 3 1/8 2014-2021” bond, IFRS 8 and IAS 33 concerning segment reporting and earnings per share were utilised.
For a better presentation of the financial statements, the income statement was presented in two separate tables: a) the Consolidated Income Statement and b) the Comprehensive Consolidated Income Statement.
The Consolidated Financial Statements were audited by the audit firm Deloitte & Touche S.p.A., the auditor appointed by the SEA SpA Company and the Group.
2.2 IFRS accounting standards, amendments and interpretations applied from January 1, 2016
The International Accounting Standards, the amendments and the interpretations for which application is mandatory as of January 1, 2016, following completion of the relative approval process by the relevant authorities, are illustrated below. The adoption of these amendments and interpretations has not had any impact on the financial position or on the result of the Company.
|Description||Date approved||Publication in the Official Gazette||Effective date as per the standard||Effective date applied by SEA|
|Amendment to IAS 19 Employee benefits||Dec 17, 14||Jan 09, 15||Periods beginning Feb 01, 15||Jan 01, 16|
|Annual improvements cycles 2010-2012||Dec 17, 14||Jan 09, 15||Periods beginning Feb 01, 15||Jan 01, 16|
|Amendment to IFRS 11 Joint arrangements on acquisition of an interest in a joint operation||Nov 24, 15||Nov 25, 15||Periods which begin from Jan 01, 16||Jan 01, 16|
|Amendment to IAS 16 Property, plant and equipment and IAS 38 Intangible assets on depreciation and amortisation||Dec 02, 15||Dec 03, 15||Periods which begin from Jan 01, 16||Jan 01, 16|
|Annual improvements cycles 2012-2014||Dec 15, 15||Dec 16, 15||Periods which begin from Jan 01, 16||Jan 01, 16|
|Amendment to IAS 1 Presentation of financial statements on the disclosure initiative||Dec 18, 15||Dec 19, 15||Periods which begin from Jan 01, 16||Jan 01, 16|
|Amendment to IAS 27 Separate financial statements on the equity method||Dec 18, 15||Dec 23, 15||Periods which begin from Jan 01, 16||Jan 01, 16|
2.3 Accounting standards, amendments and interpretations not yet applicable and not adopted in advance by the Group
Below we report the International Accounting Standards, interpretations and amendments to existing accounting standards and interpretations, or specific provisions within the standards and interpretations approved by the IASB which have already been endorsed by the European Union, which are not yet applicable on a compulsory basis and which are not adopted in advance by the Company:
|Description||Approved at the date of the present document||Effective date as per the standard|
|Amendment to IAS 12 Recognition of deferred tax assets for unrealized losses||NO||Periods which begin from Jan 01, 2017|
|Amendment to IAS 7 Disclosure initiative||NO||Periods which begin from Jan 01, 2017|
|IFRS 9 Financial instruments||YES||Periods which begin from Jan 01, 2018|
|IFRS 15 Revenue from contracts with customers||YES||Periods which begin from Jan 01, 2018|
|Amendment to IFRS 2 Clarification and measurement of share based payment transactions||NO||Periods which begin from Jan 01, 2018|
|Annual improvements cycles 2014-2016||NO||Periods which begin from Jan 01, 2018|
|IFRIC 22 Foreign currency transactions and advance consideration||NO||Periods which begin from Jan 01, 2018|
|Amendment to IAS 40 Transfers of investment property||NO||Periods which begin from Jan 01, 2018|
|IFRS 16 Leases||NO||Periods which begin from Jan 01, 2019|
No accounting standards and/or interpretations were applied in advance, whose application is obligatory for periods commencing after December 31, 2016.
The potential impact that the accounting standards, amendments and interpretations applicable in future periods may have on the financial reporting of Group companies are currently being examined and assessed.
2.3.1 IFRS standards, amendments and interpretations not yet approved by the European Union
At the date of the present Consolidated Financial Statements, the relevant bodies of the European Union have not yet concluded the process necessary for the implementation of the amendments and standards described below.
On January 30, 2014, the IASB issued IFRS 14 - Regulatory Deferral Accounts that allows first time adopters of IFRS to continue recognizing the amounts of "Rate Regulation Activities" in accordance with previously adopted accounting standards. The Company/Group not being a first-time adopter, this standard is not applicable.
On January 13, 2016, the IASB issued IFRS 16 - Leases which is intended to replace IAS 17 - Leases, and IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a model based on control (right of use) of an asset to distinguish between lease contracts and contracts for services, identifying the following differences: identification of the asset, right to substitute it, right to substantially obtain all of the economic benefits from use of the asset and right to manage use of the asset underlying the contract.
The standard establishes a single lease recognition and measurement model for the lessee which entails recognizing the leased asset, including under an operating lease, as asset in the balance sheet with a financial payable as contra entry, while also providing for the option to not recognize as leases contracts covering "low-value assets" and those with a term equal to or less than 12 months. By contrast, the Standard does not include significant changes for lessors.
The standard is applicable from January 1, 2019, but early application is permitted only for companies that opt for early adoption of IFRS 15 - Revenue from Contracts with Customers.
On January 19, 2016 an amendment was issued to IAS 12 “Recognition of Deferred Tax Assets for Unrealised Losses”. The document aims to provide clarifications on the recognition of deferred tax assets on unrealized losses upon the occurrence of certain circumstances and on the estimate of taxable income for future years. The amendments are applicable as of January 1, 2017, although early application is permitted.
On January 29, 2016 an amendment was issued to IAS 7 “Disclosure Initiative”. The document aims to provide clarifications to improve disclosures on financial liabilities. Specifically, the amendments require to disclose information that enables users of financial statements to understand the changes in liabilities arising from financing operations. The amendments are applicable as of January 1, 2017, although early application is permitted. It is not required to present comparative information relating to prior years.
On June 20, 2016 an amendment was issued to IFRS 2 “Classification and measurement of share-based payment transactions” which contains some clarification regarding accounting for the effects of vesting conditions in the presence of cash-settled share-based payments, classification of share-based payments with net settlement characteristics and reporting of changes to the terms and conditions of a share-based payment which change its classification from cash-settled to equity-settled. The amendments are applicable as of January 1, 2018, although early application is permitted.
On September 12, 2016 IASB published “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts”: for enterprises whose business is primarily composed of insurance activities, the amendments are aimed at clarifying concerns resulting from application of the new IFRS 9 standard to financial assets, before the current IFRS 4 standard is replaced by IASB with a new standard in the process of being prepared, used as a basis to measure financial liabilities.
On December 8, 2016, the IASB published the “Annual Improvements to IFRSs: 2014-2016 Cycle” (including IFRS 1 First-Time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters, IAS 28 Investments in Associates and Joint Ventures – Measuring investees at fair value through profit or loss: an investment-by-investment choice or a consistent policy choice, IFRS 12 Disclosure of Interests in Other Entities – Clarification of the scope of the Standard), which partly supplements the existing standards.
On December 8, 2016 IASB issued the interpretation IFRIC 22 “Foreign Currency Transactions and Advance Consideration” with the aim of providing guidelines for transactions in foreign currency where advance consideration is reported in the financial statements, before reporting of the relative asset, cost or revenue. This document provides instruction on how an enterprise must determine the transaction date and consequently the spot exchange rate to use for transactions in foreign currency where the payment is made or received in advance. IFRIC 22 is applicable as of January 1, 2018, although early application is permitted.
On December 8, 2016 an amendment was issued to IAS 40 “Transfers of Investment Property”. These amendments clarify transfers of property to or from investment property. Specifically, an enterprise must reclassify property to or from investment property only when there is evidence that a change in the property's use has occurred. Such change must be related to a specific event that occurred and not just be limited to a change in the intentions of the enterprise's Management. These amendments are applicable as of January 1, 2018, although early application is permitted.
On September 11, 2014 an amendment was issued to IFRS 10 and IAS 28 “Sales or Contribution of Assets between an Investor and its Associate or Joint Venture” in order to resolve the current conflict between IAS 28 and IFRS 10 related to the measurement of profit or loss resulting from the sale or contribution of a non-monetary asset to a joint venture or associate in exchange for a portion of share capital of the latter. The IASB has currently suspended the application of this amendment.
2.4 Consolidation methods and principles
The financial statements of the companies included in the consolidation scope were prepared as at December 31, 2016 and were appropriately adjusted, where necessary, in line with Group accounting principles.
The consolidation scope includes the financial statements at December 31, 2016 of SEA, of its subsidiaries, and of those subsidiaries upon which it exercises a significant influence.
In accordance with IFRS 10, companies are considered subsidiaries when the Group simultaneously holds the following three elements:
(a) power over the entity;
(b) exposure, or rights, to variable returns deriving from involvement with the same;
(c) the capacity to utilise its power to influence the amount of these variable returns.
The subsidiary companies are consolidated using the line-by-line method. The criteria adopted for the line-by-line consolidation were as follows:
- the assets and liabilities and the charges and income of the companies fully consolidated are recorded line-by-line, attributing to the minority shareholders, where applicable, the share of net equity and net result for the period pertaining to them; this share is recorded separately in the net equity and in the consolidated income statement;
- business combinations are recognised according to the acquisition method. According to this method, the amount transferred in a business combination is valued at fair value, calculated as the sum of the fair value of the assets transferred and the liabilities assumed by the Group at the acquisition date and of the equity instruments issued in exchange for control of the company acquired. Accessory charges to the transaction are generally recorded to the income statement at the moment in which they are incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recorded at fair value at the acquisition date; the following items form an exception, which are instead valued according to the applicable standard:
- deferred tax assets and liabilities;
- employee benefit assets and liabilities;
- liability or equity instruments relating to share-based payments of the company acquired or share-based payments relating to the Group issued in substitution of contracts of the entity acquired;
- assets held-for-sale and discontinued operations;
- the acquisition of minority shareholdings relating to entities in which control already exists are not considered as such, but rather operations with shareholders; the Group records under equity any difference between the acquisition cost and the relative share of the net equity acquired;
- the significant gains and losses, with the relative fiscal effect, deriving from operations between fully consolidated companies and not yet realised with third parties, are eliminated, except for the losses not realised and which are not eliminated, where the transaction indicates a reduction in the value of the asset transferred. The effects deriving from reciprocal payables and receivables, costs and revenues, as well as financial income and charges are also eliminated if significant;
- the gains and losses deriving from the sale of a share of the investment in a consolidated company which results in the loss of control are recorded in the income statement for the amount corresponding to the difference between the sales price and the corresponding fraction of the consolidated net equity sold.
Associated companies are companies in which the Group has a significant influence, which is alleged to exist when the percentage held is between 20% and 50% of the voting rights.
The investments in associated companies are measured under the equity method. The equity method is as described below:
- the book value of these investments are in line with the adjusted net equity, where necessary, to reflect the application of IFRS and includes the recording of the higher value attributed to the assets and liabilities and to any goodwill identified at the moment of the acquisition;
- the Group gains and losses are recorded at the date in which the significant influence begins and until the significant influence terminates; in the case where, due to losses, the company valued under this method indicates a negative net equity, the carrying value of the investment is written down and any excess pertaining to the Group, where this latter is committed to comply with legal or implicit obligations of the investee, or in any case to cover the losses, is recorded in a specific provision; the equity changes of the companies valued under the equity method not recognised through the income statement are recorded directly as an adjustment to equity reserves;
- the significant gains and losses not realised generated on operations between the Parent Company and subsidiary companies and investments valued under the equity method are eliminated based on the share pertaining to the Group in the investee; the losses not realised are eliminated, except when they represent a reduction in value.
2.5 Consolidation scope and changes in the year
The registered office and the share capital (at December 31, 2016 and December 31, 2015) of the companies included in the consolidation scope under the full consolidation method and equity method are reported below:
|Company||Registered Office||Share capital at 31/12/2016 (Euro)||Share capital at 31/12/2015 (Euro)|
|SEA Handling S.p.A. (in liquidation) (1)||Malpensa Airport - Terminal 2 - Somma Lombardo (VA)||10,304,659||10,304,659|
|SEA Energia S.p.A.||Milan Linate Airport - Segrate (MI)||5,200,000||5,200,000|
|SEA Prime S.p.A.||Viale dell'Aviazione. 65 - Milan||2,976,000||2,976,000|
|Signature Flight Support Italy S.r.l. (previously Prime AviationServices S.p.A.) (2)||Viale dell'Aviazione. 65 - Milan||420,000||420,000|
|Consorzio Malpensa Construction||Via del Vecchio Politecnico. 8 - Milan||51,646||51,646|
|Dufrital S.p.A.||Via Lancetti. 43 - Milan||466,250||466,250|
|SACBO S.p.A.||Via Orio Al Serio. 49/51 - Grassobbio (BG)||17,010,000||17,010,000|
|SEA Services S.r.l.||Via Caldera. 21 - Milan||105,000||105,000|
|Malpensa Logistica Europa S.p.A.||Milan Linate Airport - Segrate (MI)||6,000,000||6,000,000|
|Disma S.p.A.||Milan Linate Airport - Segrate (MI)||2,600,000||2,600,000|
The companies included in the consolidation scope at December 31, 2016 and the respective consolidation methods are reported below:
|Company||Consolidation Method at 31/12/2016||% Held at 31/12/2016||% Held at 31/12/2015|
|SEA Handling S.p.A. (in liquidation) (1)||(1)||100%||100%|
|SEA Energia S.p.A.||line-by-line||100%||100%|
|SEA Prime S.p.A.||line-by-line||98.34%||98.34%|
|Consorzio Malpensa Construction||line-by-line||51%||51%|
|Signature Flight Support Italy S.r.l. (previously Prime AviationServices S.p.A.) (2)||Equity||39.34%||98.34%|
|SEA Services S.r.l.||Equity||40%||40%|
|Malpensa Logistica Europa S.p.A.||Equity||25%||25%|
- The Extraordinary Shareholders’ Meeting of SEA Handling SpA in liquidation on June 9, 2014 approved the advance winding up of the Company and its placement into liquidation from July 1, 2014, while also authorising the provisional exercise of operations after July 1, for the minimum period necessary (the provisional exercise was confirmed in the Shareholders’ Meeting of SEA Handling in liquidation of July 30, 2014 for the period July 1 - August 31, 2014). The decision to discontinue of the commercial aviation handling business did not result in the exit from the consolidation scope of the Group but the application of IFRS 5 for the discontinued operations.
- Indirectly through SEA Prime S.p.A.. On April 1, 2016 SEA Prime S.p.A. transferred 252 shares, representing 60% of share capital of the company Signature Flight Support Italy Srl. (previously Prime AviationServices SpA), to a third party company. Therefore, since the company was a subsidiary until March 31, 2016, it was consolidated under the full consolidation method in the consolidated financial statements of the SEA Group. Starting on April 1, 2016, the date when the Group lost control the company was classified as an associate and measured with the equity method. On February 14, 2017 the shareholder's meeting voted to transform the company from a Joint Stock Company to a Limited Liability Company and to change the company name from "Prime AviationServices" to "Signature Flight Support Italy".
2.6 Conversion of foreign currency transactions
The transactions in currencies other than the operational currency of the company are converted into Euro using the exchange rate at the transaction date.
The foreign currency gains and losses generated from the closure of the transaction or from the translation at the balance sheet date of the assets and liabilities in foreign currencies are recognised in the income statement.
2.7 Accounting policies
An intangible asset is a non-monetary asset, identifiable and without physical substance, controllable and capable of generating future economic benefits. These assets are recorded at purchase and/or production cost, including the costs of bringing the asset to its current use, net of accumulated amortisation, and any loss in value. The intangible assets are as follows:
(a) Rights on assets under concession
The "Rights on assets under concession" represent the right of the Lessee to utilise the asset under concession (so-called intangible asset method) in consideration of the costs incurred for the design and construction of the asset with the obligation to return the asset at the end of the concession. The value corresponds to the "fair value" of the design and construction assets increased by the financial charges capitalised, in accordance with IAS 23, during the construction phase. The fair value of the construction work is based on the costs actually incurred increased by a mark-up of 6% representing the best estimate of the remuneration of the internal costs for the management of the works and design activities undertaken by the group which is a mark-up a third party general contractor would request for undertaking the same activities, in accordance with IFRIC 12. The determination of the fair value results from the fact that the lessee must apply paragraph 12 of IAS 18 and therefore if the fair value of the services received (specifically the right to utilise the asset) cannot be determined reliably, the revenue is calculated based on the fair value of the construction work undertaken.
The construction work in progress at the balance sheet date is measured based on the state of advancement of the work in accordance with IAS 11 and this amount is reported in the income statement line “Revenues for works on assets under concession’.
Restoration or replacement works are not capitalised and are included in the estimate of the restoration and replacement provision as outlined below.
Assets under concession are amortised over the duration of the concession, as it is expected that the future economic benefits of the asset will be utilised by the lessee.
The accumulated amortisation provision and the restoration and replacement provision ensure the adequate coverage of the following charges:
- free devolution to the State at the expiry of the concession of the assets devolved freely with useful life above the duration of the concession;
- restoration and replacement of the components subject to wear and tear of the assets under concession.
Where events arise which indicate a reduction in the value of these intangible assets, the difference between the present value and the recovery value is recognised in the income statement.
(b) Industrial patents and intellectual property rights
Patents, concessions, licenses, trademarks and similar rights
Trademarks and licenses are amortised on a straight-line basis over the estimated useful life.
Software costs are amortised on a straight-line basis over three years, while software programme maintenance costs are charged to the income statement when incurred.
Intangible assets with definite useful life are annually tested for losses in value or where there is an indication that the asset may have incurred a loss in value. Reference should be made to the paragraph below “Impairments”.
Tangible fixed assets includes property, part of which under the scope of IFRIC 12, and plant and equipment.
Land and Buildings
Property, in part financed by the State, relates to tangible assets acquired by the Group in accordance with the 2001 Agreement (which renewed the previous concession of May 7, 1962). The 2001 Agreement provides for the obligation of SEA to maintain and manage airport assets for the undertaking of such activities and the right to undertake structural airport works, which remain the property of SEA until the expiry of the 2001 Agreement, i.e. May 4, 2041. The fixed assets in the financial statements are reported net of State grants.
Depreciation of property is charged based on the number of months held on a straight-line basis, which depreciates the asset over its estimated useful life. Where this latter is beyond the date of the end of the concession, the amount is amortised on a straight-line basis until the expiry of the concession. Applying the principle of the component approach, when the asset to be depreciated is composed of separately identifiable elements whose useful life differs significantly from the other parts of the asset, the depreciation is calculated separately for each part of the asset.
For land, a distinction is made between land owned by the Group, classified under property, plant and equipment and not subject to depreciation and expropriated areas necessary for the extension of the Malpensa Terminal, classified under “Assets under concession” and amortised over the duration of the concession.
The free granting of assets is recognised at market value, according to independent technical expert opinions.
Plant & Equipment
These are represented by tangible fixed assets acquired by the Group which are not subject to the obligation of free devolution.
Plant and equipment are recorded at purchase or production cost and, only with reference to owned assets, net of accumulated depreciation and any loss in value. The cost includes charges directly incurred for bringing the asset to their condition for use, as well as dismantling and removal charges which will be incurred consequent of contractual obligations, which require the asset to be returned to its original condition.
The expenses incurred for the maintenance and repairs of an ordinary and/or cyclical nature are directly charged to the income statement when they are incurred. The capitalisation of the costs relating to the expansion, modernisation or improvement of owned tangible assets or of those held in leasing, is made only when they satisfy the requirements to be separately classified as an asset or part of an asset in accordance with the component approach, in which case the useful life and the relative value of each component is measured separately.
Depreciation is charged to the income statement based on the number of months held on a straight-line basis, which depreciates the asset over its estimated useful life. Where this latter is beyond the date of the end of the concession, the amount is amortised on a straight-line basis until the expiry of the concession. Applying the principle of the component approach, when the asset to be depreciated is composed of separately identifiable elements whose useful life differs significantly from the other parts of the asset, the depreciation is calculated separately for each part of the asset.
The depreciation rates for owned assets, where no separate specific components are identified are reported below:
|Loading and unloading vehicles||10.0%|
|Furniture and fittings||12.0%|
The useful life of property, plant and equipment and their residual value are reviewed and updated, where necessary, at least at the end of each year.
This account includes owned buildings not for operational use. Investment property is initially recognised at cost and subsequently measured utilising the amortised cost criteria, net of accumulated depreciation and loss in value.
Depreciation is calculated on a straight-line basis over the useful life of the building.
At each balance sheet date, the property, plant and machinery, intangible assets and investments in subsidiaries and associated companies are analysed in order to identify any indications of a reduction in value. Where these indications exist, an estimate of the recoverable value of the above-mentioned assets is made, recording any write down compared to the relative book value in the income statement. The recoverable value of an asset is the higher between the fair value less costs to sell and its value in use, where this latter is the fair value of the estimated future cash flows for this asset. For an asset that does not generate sufficient independent cash flows, the realisable value is determined in relation to the cash-generating unit to which the asset belongs. In determining the fair value consideration is taken of the purchase cost of a specific asset which takes into account a depreciation coefficient (this coefficient takes into account the effective conditions of the asset). In defining the value in use, the expected future cash flows are discounted utilising a discount rate that reflects the current market assessment of the time value of money, and the specific risks of the activity. A reduction in value is recognised in the income statement when the carrying value of the asset is higher than the recoverable amount. When the reasons for the write-down no longer exist, the book value of the asset (or of the cash-generating unit) is restated through the income statement, up to the value at which the asset would be recorded if no write-down had taken place and amortisation and depreciation had been recorded.
On initial recognition, the financial assets are classified in one of the following categories based on the relative nature and purpose for which they were acquired:
- financial assets at fair value through profit or loss;
- loans and receivables;
- available for sale financial assets.
The financial assets are recorded under assets when the company becomes contractually party to the assets. The financial assets sold are de-recognised when the right to receive the cash flow is transferred together with all the risks and benefits associated with ownership.
Purchases and sales of financial assets are recognised at the valuation date of the relative transaction. Financial assets are measured as follows:
(a) Financial assets at fair value through profit or loss
Financial assets are classified in this category if acquired for the purposes to be sold in the short term period. The assets in this category are classified as current and measured at fair value; the changes in fair value are recognised in the income statement in the period in which they arise, if significant.
(b) Loans and receivables
Loans and receivables are financial instruments, principally relating to trade receivables, non-derivative, not listed on an active market, from which fixed or determinable payments are expected. Loans and receivables are stated as current assets, except for amounts due beyond 12 months from the balance sheet date, which are classified as non-current. These assets are measured at amortised cost, on the basis of the effective interest rate.
When there is an indication of a reduction in value, the asset is reduced to the value of the discounted future cash flows obtainable. The losses in value are recognised in the income statement. When, in subsequent periods, the reasons for the write-down no longer exist, the value of the assets are restated up to the value deriving from the application of the amortised cost.
(c) AFS financial assets
The AFS assets are non-derivative financial instruments explicitly designated in this category, or are not classified in any of the previous categories and are classified under non-current assets unless management has the intention to sell them within 12 months from the balance sheet date. These financial assets are measured at fair value and the valuation gains or losses are allocated to an equity reserve under “Other comprehensive income”. They are recognised in the income statement only when the financial asset is sold, or, in the case of negative cumulative changes, when it is considered that the reduction in value already recorded under equity cannot be recovered.
In the case of investments classified as Available-for-sale investments, a prolonged or significant decline in the fair value of the investment below the initial cost is considered an indicator of loss in value.
Derivative financial instruments
Derivative financial instruments are classified as hedging instruments when the relation between the derivative and the hedged item is formally documented and the effectiveness of the hedge, periodically verified, is high. When the hedged derivatives cover the risk of change of the fair value of the instruments hedged (fair value hedge; e.g. hedge in the variability of the fair value of asset/liabilities at fixed rate), these are recorded at fair value through the income statement; therefore, the hedging instruments are adjusted to reflect the changes in fair value associated to the risk covered. When the derivatives hedge a risk of changes in the cash flows of the instruments hedged (cash flow hedge), the hedging is designated against the exposure to changes in the cash flows attributable to the risks which may in the future impact on the income statement. The effective part of the change in fair value of the part of the derivative contracts which are designated as hedges in accordance with IAS 39 is recorded in an equity account (and in particular "other items of the comprehensive income statement"); this reserve is subsequently transferred to the income statement in the period in which the transaction hedged impacts the income statement. The ineffective part of the change in the fair value of the part of the derivative contracts, as indeed the entire change in the fair value of the derivatives which are not designated as hedges or which do not comply with the requirements of the above-mentioned IAS 39, are recognised directly in the income statement in the account "financial income/charges".
The fair value of traded financial instruments is based on the listed price at the balance sheet date. Where the market for a financial asset is not active (or refers to non-listed securities), the Group determines fair value utilising valuation techniques which include: reference to advanced negotiations in course, references to securities which have the same characteristics, analyses based on cash flows, price models based on the use of market indicators and aligned, as far as possible, to the assets to be valued.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured based on the amortised cost method net of the doubtful debt provision. When there is an indication of a reduction in value, the asset is reduced to the value of the discounted future cash flows obtainable.
Indicators of loss in value include, among others, significant contractual non-compliance, significant financial difficulties, insolvency risk of the counterparty. Receivables are reported net of the provision for doubtful debts. When in subsequent periods the reduction in the value of the asset is confirmed, the doubtful debt provision is utilised; otherwise, where the reasons for the previous write-down no longer exist, the value of the asset is reversed up to the recoverable amount derived from applying the amortised cost method where no write down had been made. For further information, reference should be made to Note 4.1.
Inventories are measured at the lower of average weighted purchase and/or production cost and net realisable value or replacement cost. The valuation of inventories does not include financial charges.
Cash and cash equivalents includes cash, bank deposits, and other short-term forms of investment, due within three months. At the balance sheet date, bank overdrafts are classified as financial payables under current liabilities in the balance sheet. Cash and cash equivalents are recorded at fair value.
Provisions for risks and charges
The provisions for risks and charges are recorded to cover known or likely losses or liabilities, the timing and extent of which are not known with certainty at the balance sheet date. They are recorded only when there exists a current obligation (legal or implicit) for a future payment resulting from past events and it is probable that the obligation will be settled. This amount represents the best estimate less the expenses required to settle the obligation.
Possible risks that may result in a liability are disclosed in the notes under the section on commitments and risks without any provision.
Restoration and replacement provision of assets under concession
The accounting treatment of the works undertaken by the lessee on the assets under concession, as per IFRIC 12, varies depending on the nature of the work: normal maintenance on the asset is considered ordinary maintenance and therefore recognised in the income statement; replacement work and programmed maintenance of the asset at a future date, considering that IFRIC 12 does not provide for the recognition of a physical asset but a right, must be recognised in accordance with IAS 37 - "Provisions and potential liabilities" – which establishes recognition to the income statement of a provision and the recording of a provision for charges in the balance sheet.
The restoration and replacement provision of the assets under concession include, therefore, the best estimate of the present value of the charges matured at the balance sheet date for the programmed maintenance in the coming years and undertaken in order to ensure the functionality, operations and security of the assets under concession.
It should be noted that the restoration and replacement provision of the assets refers only to fixed assets within the scope of IFRIC 12 (assets under concession classified to intangible assets).
Employee benefit provisions
The Companies of the Group have both defined contribution plans (National Health Service contributions and INPS pension plan contributions) and defined benefit plans (Post-Employment Benefits).
A defined contribution plan is a plan in which the Group participates through fixed payments to third party fund operators, and in relation to which there are no legal or other obligation to pay further contributions where the fund does not have sufficient assets to meet the obligations of the employees for the period in course and previous periods. For the defined contribution plans, the Group pays contributions, voluntary or established contractually, to public and private pension funds. The contributions are recorded as personnel costs in accordance with the accruals principle. The advanced contributions are recorded as an asset which will be repaid or offset against future payments where due.
A defined benefit plan is a plan not classified as a contribution plan. In the defined benefit programmes, the amount of the benefit to be paid to the employee is quantifiable only after the termination of the employment service period, and is related to one or more factors such as age, years of service and remuneration; therefore the relative charge is recognised to the income statement based on actuarial calculations. The liability recorded in the accounts for defined benefit plans corresponds to the present value of the obligation at the balance sheet date, net, where applicable, of the fair value of the plan assets. The obligations for the defined benefit plans are determined annually by an independent actuary utilising the projected unit credit method. The present value of the defined benefit plan is determined discounting the future cash flows at an interest rate equal to the obligations (high-quality corporate) issued in the currency in which the liabilities will be settled and takes into account the duration of the relative pension plan. The Group already adopted at December 31, 2012 the accounting choice within IAS 19 which provides for actuarial gains/losses to be recorded directly in equity and consequently, the entry into force of IAS 19 Revised which eliminates alternative treatments to those already adopted by the Group does not have any impact on the comparative classification of the accounts.
We report that, following amendments made to the leaving indemnity regulations by Law No. 296 of December 27, 2006 and subsequent Decrees and Regulations issued in the first half of 2007, the leaving indemnity provision due to employees in accordance with Article 2120 Civil Code is classified as defined benefit plans for the part matured before application of the new legislation and as defined contribution plans for the part matured after the application of the new regulation.
Post-employment benefits are paid to employees when the employee terminates his employment service before the normal pension date, or when an employee accepts voluntary termination of the contract. The Group records post-employment benefits when it is demonstrated that the termination of the employment contract is in line with a formal plan which determines the termination of the employment service, or when the provision of the benefit is a result of a leaving indemnity programme.
Financial liabilities and other commitments to be paid are initially measured at fair value, net of directly allocated accessory costs, and subsequently at amortised cost, using the effective interest rate. When there is a change in the expected cash flows and it is possible to estimate them reliably, the value of the payables is recalculated to reflect this change, based on the new present value of the expected cash flows and on the internal yield initially determined. The financial liabilities are classified under current liabilities, except when the Group has an unconditional right to defer their payment for at least 12 months after the balance sheet date.
Purchases and sales of financial liabilities are recognised at the valuation date of the relative transaction.
Financial liabilities are de-recognised from the balance sheet when they are settled and the Group has transferred all the risks and rewards relating to the instrument.
Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently measured based on the amortised cost method.
Reverse factoring transactions
In order to facilitate credit access to its suppliers, the Group has entered into reverse factoring or indirect factoring agreements (with recourse). On the basis of contractual arrangements in place, suppliers may, at their discretion, sell the amounts due from the Group to a financing institution and cash in the amount before maturity.
The payment terms provided on the invoice are not subject to further delays agreed between the supplier and the Group and therefore no charges are applied.
Within this framework, the relationships for which the primary obligation with the supplier is maintained and a payment extension, if granted, does not entail a change in payment terms, retain their nature and are therefore classified as trade payables.
Revenues are recognised at fair value of the amount received for the services from the ordinary activities. They are calculated following the deduction of VAT and discounts.
The revenues, principally relating to the provision of services, are recognised in the accounting period in which they are provided.
Rental income and royalties are recognised in the period they mature, based on the contractual agreements underwritten.
Handling activity revenues are recognised on an accruals basis, according to the number of passengers in the year.
Revenues from electric and thermal energy production are recognised on an accruals basis, according to the effective quantity produced in kWh. The tariffs are based on the contracts in force - both those at fixed prices and indexed prices.
Green certificates, white certificates and emission quotas
The companies which produce electricity from renewable sources receive green certificates from the Energy Service Operator (GSE). Revenues are recognised on an accruals basis, both in relation to certificates issued on a preliminary basis and final certificates issued. On the recognition of the revenues a receivable is recorded from the GSE and on the sale of the certificates this is then recorded as a customer receivable.
White certificates allocated by the GSE are handled in a similar manner (for the first time in 2013, for the years 2012 and 2013), following the recognition of the Malpensa station as a high yield cogeneration plant.
Revenues for works on assets under concession
Revenues on construction work are recognised in relation to the state of advancement of works in accordance with the percentage of completion method and on the basis of the costs incurred for these activities increased by a mark-up of 6% representing the remuneration of the internal costs of the management of the works and design activities undertaken by the SEA Group, the mark-up which would be applied by a general contractor (as established by IFRIC 12).
Public grants, in the presence of a formal resolution, are recorded on an accrual basis in direct correlation to the costs incurred (IAS 20).
Capital public grants relating to property, plant and equipment are recorded as a reduction in the acquisition value of the assets to which they refer.
Operating grants are recorded directly in the income statement.
Recognition of costs
Costs are recognised when relating to assets or services acquired or consumed in the year or by systematic allocation.
The incentives granted to airlines, and based on the number of passengers transported, invoiced by the airlines to the Company for (i) the maintenance of traffic at the airport or (ii) the development of traffic through increasing existing routes or launching new routes, are considered commercial costs and, as such, classified under “Operating costs” and recognised in correlation to the revenues to which they refer. In particular, in the opinion of management which monitors the effectiveness of these commercial initiatives together with other marketing initiatives classified under commercial costs, although these incentives are allocated to specific revenue accounts proportionally, because of their contribution to traffic and to the growth of the airport, from an operating viewpoint they must be considered together with all costs incurred by the Company through commercial and marketing activities and are therefore reported in the Management Accounts and valued in the company KPI together with marketing costs. Therefore, the decision was taken to classify these incentives in the annual financial reporting in line with their operating objectives.
Financial income is recognised on an accruals basis and includes interest income on funds invested, foreign currency gains and income deriving from financial instruments, when not offset by hedging operations. Interest income is recorded in the income statement at the moment of maturity, considering the effective yield.
Financial charges are recorded on an accrual basis and include interest on financial payables calculated using the effective interest method and currency losses. The financial charges incurred on investments in assets for which a significant period of time is usually needed to render the assets available for use or sale (qualifying assets) are capitalised and amortised over the useful life of the class of the assets to which they refer in accordance with the provisions of the new version of IAS 23.
Current income taxes are calculated based on the assessable income for the year, applying the current tax rates at the balance sheet date.
Deferred taxes are calculated on all differences between the assessable income of an asset or liability and the relative book value, with the exception of goodwill. Deferred tax assets for the portion not compensated by deferred tax liabilities are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. The deferred taxes are calculated utilising the tax rates which are expected to be applied in the years when the temporary differences will be realised or settled. Deferred tax assets are recorded when their recovery is considered probable.
Current and deferred income taxes are recorded in the income statement, except those relating to accounts directly credited or debited to equity, in which case the fiscal effect is recognised directly to equity and to the Comprehensive Income Statement. Taxes are compensated when applied by the same fiscal authority, there is a legal right of compensation and the payment of the net balance is expected.
Other taxes not related to income, such as taxes on property, are included under “Other operating costs”.
Within the fiscal consolidation, each company transfers to the consolidating company the tax income or loss; the consolidating company records a receivable with the company that contributes assessable income equal to the income tax to be paid. Vice versa, for companies that contribute tax losses, the consolidating company reports a liability.
Payables for dividends to shareholders are recorded in the year in which the distribution is approved by the Shareholders’ Meeting.
The dividends distributed between Group companies are eliminated in the income statement.