Leonardo Spa · MIL:LDO
Leonardo Spa — Finmeccanica — Conference call IAS/IFRS (July 2005)
34 slides from Leonardo Spa's conference presentation, Jul 25, 2005
Slide 1: Transition to IAS/IFRS
Transition to IAS/IFRS Effects on Finmeccanica consolidated financial results 2004 25 July 2005 Alessandro Pansa Co-General Manager Giuseppe Aurilio Senior Manager Administration & Control
Slide 2: Group's adoption strategy
Group’s adoption strategy The Finmeccanica Group has decided to adopt the new IAS/IFRS according to the following steps: ¾ application to the consolidated financial statements starting from the 2005 half-year report; ¾ application of IAS 32 and IAS 39 starting from 1 January 2005; ¾ application to t
Slide 3: Basis of preparation
Basis of preparation The opening IAS/IFRS balance sheet and IAS/IFRS financial statements at 1 January 2004 and at 31 December 2004 have been prepared on the basis of the standards adopted by the EU as envisaged in Article 6 of Regulation no. 1606/2002. Therefore, the standards described therein mig
Slide 4: Audit activities
Audit activities The consolidated results at 31 December 2004, together with the reconciliation prospectus which also includes the opening balance sheet, are currently being audited by PriceWaterhouseCooper. 4
Slide 5: Effects on the consolidated profit and loss statements, opening balance sheet and net financial debt
Effects on the consolidated profit and loss statements, the opening balance sheet and net financial debt of Finmeccanica 5
Slide 6: Main effects of the introduction of new international accounting principles
Main effects of the introduction of new international accounting principles ¾ Adjustment of net equity at 31/12/2003 (opening balance sheet impact of IAS/IFRS) determined retrospectively; ¾ Reclassification of profit & loss statement 2004 according to the new principles; ¾ Changes to the classificat
Slide 7: Changes to the area of consolidation
Changes to the area of consolidation The application of the new principles has caused the following changes: ¾ proportional consolidation (50%) of the “Special Purpose Entities” (SPES) operating within the GIE ATR consortium, in partnership with EADS (IAS27); ¾ consolidation of the main companies cu
Slide 8: Impact on Value of Production in 2004
Impact on Value of Production in 2004 Value of production decreased by Eur 229 m mainly due to the reclassification of AMS UK and BredaMenariniBus as discontinued operations. 2.004 (Eur mln) Revenues from sales and services 7.529 Change in contract work in progress 1.446 Change in semifinished goods
Slide 9: Impact on EBIT in 2004
Impact on EBIT in 2004 EBIT decreased by Eur 52m due to the reclassification of extraordinary items. Extraordinary costs may be classified separately only when relating to companies which meet the IFRS5 requirements for “discontinued operations”. (Eur mln) 2004 EBIT according to Italian GAAP 518 IFR
Slide 10: Impact on Profit & Loss statements in 2004
Impact on Profit & Loss statements in 2004 Finmeccanica consolidated income statements are presented using a classification based on the nature of expenses. ITA GAAP IFRS (Eur mln) Revenues from sales and change in WIP 8.975 8.851 Other revenues 38 Total revenues 9.013 8.851 Change in semi-finished
Slide 11: Impact on December 2003 and December 2004 balance sheets
Impact on 31 December 2003 and 31 December 2004 balance sheets Net equity at 2004 net Net equity at (Eur mln) 31/12/2003 income 31/12/2004 Amount according to Italian GAAP 3.302 548 3.724 IAS/IFRS adjustments Adjustments to book value of tangible assets, 6 14 20 financial lease, derecognition of int
Slide 12: Impact on Assets and Liabilities at December 2004
Impact on Assets and Liabilities at 31 December 2004 The IAS/IFRS principles require that assets and liabilities are classified according to their maturity and to their degree of liquidity as “current” and “non current”. (Eur mln) ITA GAAP IFRS (Eur mln) ITA GAAP IFRS Non-current assets 4.945 5.357
Slide 13: Impact on net debt at December 2004
Impact on net debt at 31 December 2004 Net debt at 31 December 2004 rose from € 371m to € 640m due to the introduction of IAS/IFRS principles. This does not include the effects deriving from the application of IAS32 and IAS39, which will take effect from 1 January 2005. (Eur mln) Importo Net financi
Slide 14: Comments on main IAS/IFRS adjustments
Comments on main IAS/IFRS adjustments Preliminary effects of the transition 14
Slide 15: Fixed assets: Tangibles
Fixed assets: Tangibles Application of the component approach for calculating depreciation The new standards require that if an asset is made up of component parts, whose useful life is significantly different from that of the other components, each component part is depreciated separately. This sta
Slide 16: Fixed assets: Finance leases
Fixed assets: Finance leases Assets held under finance leases are now recognised according to the finance lease method unlike in Italian financial statements. Owing to this recognition method, the lessee recognises the asset in the balance sheet at its fair value or, if lower, at the current value o
Slide 17: Fixed assets: Intangibles
Fixed assets: Intangibles IAS/IFRS principles are more restrictive regarding the capitalization of intangible assets if compared to previous GAAP. The application of IAS 38 has impacted the group as follows: Shareholders' equity at 31 Dec. (Eur mln) 2003 Share of research included among R&D costs (1
Slide 18: Fixed assets: Derecognition of goodwill amortisation
Fixed assets: Derecognition of goodwill amortisation Goodwill is no longer amortised. It is tested for impairment at least annually. Cash Generating Units to be taken into account when making impairment test are generally considered as the legal entities through which the Group operates in the vario
Slide 19: Personnel costs: Staff severance provision
Personnel costs: Staff severance provision The staff severance provision (“TFR”) has been considered as a defined benefit plan Hence, under IAS 19 the liability is no longer recognised at nominal value but at current value, calculated on the basis of demographic, statistical and actuarial assumption
Slide 20: Personnel costs: Pension plans
Personnel costs: Pension plans Under IFRS post-employment benefits (i.e. pension, life insurance and healthcare after employment, etc.) are classified as “defined contribution plans” and “defined benefit plans”. For defined contribution plans, the enterprise is only obliged to pay contributions to t
Slide 21: Personnel cumulative costs: employee defined benefit plans
Personnel cumulative costs: employee defined benefit plans The cumulative actuarial losses accumulated at 1 January 2004 were fully recorded as opening balance-sheet adjustments. In subsequent years actuarial gains and losses will be reported using the “corridor approach”, which will dilute the impa
Slide 22: Personnel costs: other employee benefits
Personnel costs: other employee benefits The item includes adjustments to other long-term employee benefits (seniority premiums, healthcare, etc.), which are recognised based on actuarial assumptions. As permitted by IFRS 1, all cumulative actuarial gains and losses arising from the new measurement
Slide 23: Change in scope of consolidation
Change in scope of consolidation The new IAS/IFRS heavily restrict cases of exclusion from the scope of consolidation and require a substantial interpretation of relations with companies and SPEs, regardless of existing shareholdings. Therefore, at present the scope of consolidation includes all Gro
Slide 24: Adjustments to the book value of the investment in STM
Adjustments to the book value of the investment in STM The contribution of the equity investment in STMicroelectronics (STM) to the consolidated income statement was adjusted to reflect the following effects due to the adoption of IAS: ¾the revaluation of the investment increased by € 7m (from € 100
Slide 25: Other reference standards
Other reference standards 25
Slide 26: Tangible assets
Tangible assets ¾Tangible assets have been stated, except for the effects we have already commented on of the adjustments due to the introduction of IFRS, consistently with the principles used for the 2004 financial statements prepared according to Italian accounting standards. We have therefore mea
Slide 27: Intangible assets
Intangible assets ¾Intangible assets are stated at purchase or production cost calculated on the basis of previously applied standards; ¾Intangible assets with a definite useful life are systematically amortised over their estimated useful lives. Assets with an indefinite useful life, among which go
Slide 28: R&D – non-recurring expenses
R&D – “non-recurring expenses” ¾Effective 1-1-2004 the Group capitalised only development costs fully compliant with IAS 38 requirements; ¾Assets that could be defined as “non-recurring costs” were suspended among inventories at cost. Non-recurring costs relate to “pre-definition, definition and des
Slide 29: Payables under Law 808/1985
Payables under Law 808/1985 Payables to the Ministry of Productive Activities under article 3a of Law 808/1985 are classified among current liabilities because they are destined to finance the operating cycle of activities of the Company (the related asset is recognised as an inventory within workin
Slide 30: Impairment test
Impairment test ¾Assets are tested for impairment at least annually and in all cases the Group reference indicators and the reference market situation show the risk of impairment; ¾The impairment test is performed at the level of the Cash Generating Units (“CGU”), which are generally identified in e
Slide 31: Equity investments and securities
Equity investments and securities ¾Equity investments in associated companies are valued according to the equity method; ¾Equity investments in other companies, which are in general companies in which the percentage held is lower than 20%, are recorded at cost; ¾Equity investments in subsidiaries, e
Slide 32: Contracts
Contracts ¾Long-term contracts are measured based on the percentage of completion method; ¾Contracts shorter than 12 months are measured under IAS/IFRS based on the percentage of completion (they were recognised at cost under previous GAAP); ¾Work in progress is recognised net of advances and progre
Slide 33: Safe Harbor Statement
Safe Harbor Statement NOTE: Some of the statements included in this document are not historical facts but rather statements of future expectations, also related to future economic and financial performance, to be considered forward-looking statements. These forward-looking statements are based on Co
Slide 34: IR Contacts
IR Contacts Investor Relations Finmeccanica: Piazza Monte Grappa 4, 00195 Rome – Italy E-mail: investor_relations@finmeccanica.it Website: www.finmeccanica.it John Douglas Stewart, Emilia Iannicelli, Vice President Investor Relations, IR Event Coordinator, tel. +39 06 32473.290 tel. +39 06 32473.520