2.3.17 LIABILITIES FOR EMPLOYEE BENEFITS

(i) Defined contribution plans

The Group participates in public or privately defined contribution pension schemes on a mandatory, contractual or voluntary basis. The payment of contributions fulfills the Group's obligation towards its employees. The contributions are costs recognized in the period in which they are due.

(ii) Defined benefit plans for employees for Italian companies

The defined benefit plans for employees are payable on or after the termination of the period of employment in the Group. These mainly include the severance indemnities which are calculated separately for each plan using actuarial methods to estimate the amount of future benefit accrued to employees during the year and in previous years. The resulting benefit is discounted and recorded net of the fair value of any related assets. The interest rate used to calculate the present value of the obligation was determined in accordance with para. 78 IAS 19, of the Iboxx Corporate A index with duration 7-10 determined at the date of valuation. To this end, the yield for a duration comparable to the overall duration of the worker's covered by the assessment was chosen.

In the case of increases in plan benefits, the portion of the increase relating to the previous employment period is charged to the income statement on a straight line basis over the period in which the related rights will be acquired. If the rights are acquired immediately, the increase is immediately recorded in the income statement. The expected present value of benefits payable in the future related to the length of employment in the current period, conceptually similar to the accrued share of the employee severance indemnity (TFR), is classified under personnel costs in the income statement while the implicit financial charges are reclassified in the applicable financial section.

(iii) Employee defined benefit plans for German and American subsidiaries

Certain group companies offer defined benefit, post-employment, and other long-term pension plans. The cost of providing benefits under the plan is determined using the projected unit credit method. The companies' net obligation is calculated separately for each plan by estimating the amount of future benefit that employees have accrued in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

Measurements, including actuarial gains and losses and the return on plan assets (excluding interest), are recognized immediately in the balance sheet, with a corresponding debit or credit to retained earnings, through comprehensive income for the period they occur in. Remeasurements are not reclassified to earnings in subsequent periods. Costs for past services are recognized in earnings on the date of the plan amendment or reduction. Interest is calculated by applying the discount rate to the defined benefit liability.

The companies' obligation with respect to other long-term employee benefits is equal to the future benefit that employees have received in exchange for their current work and in prior periods. This benefit is discounted to determine its present value.

2.3.18 INCOME TAXES

Income taxes recognized in the income statement include current and deferred taxes. Income taxes are generally charged to the income statement, unless they relate to items recognized directly under capital and reserves. In this case, the income taxes are also charged directly to capital and reserves, as a variation to the amount recorded.

Current taxes are taxes calculated by applying the tax rate in effect on the balance sheet date and adjustments to prior year taxes to taxable income. Deferred taxes are calculated using the so-called liability method on timing differences between the amount of assets and liabilities recorded in the financial statements and the corresponding values recognized for tax purposes. Deferred taxes are calculated according to the designated method of reversal of timing differences, on the basis of realistic estimates of financial charges resulting from the application of the tax legislation in force at the date in which the financial statements were prepared.

Deferred tax assets are recognized only if it is probable that sufficient taxable income will be generated in future years to realize these deferred taxes.

2.3.19 PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges relate to costs and charges of a specific nature and certain or likely existence, the amount and date of occurrence of which are not known at the close of the period. Provisions are recognized when: o the existence of a pending liability arising from a past event is probable; o it is likely that the obligation will be burdensome; o the amount of the obligation can be estimated reliably.

Provisions are recorded at the value reflecting the best estimate of the amount the company would reasonably pay to settle the obligation or transfer it to third parties at the end of the period.

The costs that the Group expects to incur to carry out restructuring plans are recorded in the financial year the Company formally defines the plan and the interested parties have a valid expectation that the restructuring will happen.

The provisions are periodically updated to reflect any variations in estimates of costs and realization times. Revisions of the provision estimates are charged in the same income statement item that had previously held the provision. The notes to the consolidated financial statements illustrate the contingent liabilities consisting of: o possible, but not probable, obligations arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly under the control of the company; o present obligations arising from past events the amount of which cannot be reasonably estimated or the fulfillment of which will probably not be burdensome.

2.3.20 CURRENT FINANCIAL LIABILITIES, TRADE PAYABLES AND OTHER PAYABLES

Trade payables and other payables, which mature within the normal commercial terms, are not discounted and are recognized at cost (identified by nominal value) reflecting their settlement value. Current financial liabilities include the shortterm portion of borrowings, including payables for cash advances and other financial liabilities. Financial liabilities are measured at amortized cost by recording charges in the income statement using the effective interest rate method, with the exception of financial liabilities purchased for trading purposes or derivatives, or those designated as FVTPL by management at the date of initial recognition, which instead are measured at fair value through profit or loss (see para. Financial derivatives).