2.3.25 SHARE-BASED PAYMENTSTRANSACTIONS WITH PAYMENT SETTLED WITH CAPITAL INSTRUMENTS

The incentive plan based on the Parent Company's ordinary shares (Stock Grant Plan), reserved for CEO of Comer Industries S.p.A., was terminated. The cost of transactions settled with capital instruments is determined by the fair value on the date on which the assignment is made, using an appropriate valuation method. Such cost, corresponding to the increase in shareholders' equity, is recorded under personnel costs over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognized for these transactions at the end of each financial year up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually accrue.

Service or performance conditions are not taken into account when the fair value of the plan at the grant date is defined. However, the likelihood that these conditions are met in defining the best estimate of the number of equity instruments that will be accrued is considered. Market conditions are reflected in the fair value at the grant date. Any other condition linked to the plan, which does not involve a service obligation, is not considered as a maturity condition. Non-accruing conditions are reflected in the fair value of the plan and imply the immediate recognition of the cost of the plan, unless there are also service or performance conditions.

No cost is recognized for rights that do not accrue because the performance and/or service conditions are not met. When the rights include a market condition or a non-vesting condition, they are treated as if they had accrued regardless of whether or not the market conditions or other nonvesting conditions to which they are subject are met, it being understood that all other performance and/or service conditions must be met.

If the conditions of the plan are modified, the minimum cost to be recognized is the fair value at the grant date in the absence of the modification, assuming that the original conditions of the plan are satisfied. In addition, a cost is recognized for each change that results in an increase in the total fair value of the payment plan, or is otherwise favorable to employees; this cost is measured with reference to the date of the change. When a plan is derecognized by the entity or the counterparty, any remaining element of the plan's fair value is immediately expensed to the income statement.

2.3.26 USE OF ESTIMATES

The preparation of the consolidated financial statements requires that the Directors apply accounting standards and methods that, in certain circumstances, are based on difficult and subjective valuations and estimates based on past experience and assumptions which are from time to time considered reasonable and realistic depending on the relative circumstances. The application of these estimates and assumptions affect the amounts reported in the financial statements, as well as the information provided. The final values of the accounting items for which these estimates and assumptions were used may differ from those reported in the financial statements due to uncertainties regarding the assumptions and the conditions on which the estimates are based. Estimates and assumptions are reviewed periodically and the effects of each variation recognized in the period in which the estimate is revised if the revision affects only the current period, or even in subsequent periods if the revision affects the current period and those in the future. The financial statement items which, more than others, require a greater degree of discretion by the Directors when making estimates and for which a change underlying the assumptions used could have a significant impact on the financial statements are: deferred taxes, allowance for doubtful accounts, provisions for product warranty risks, other provisions for legal risks, and the inventory write-down provision for semi-finished and finished products.

ALLOWANCE FOR DOUBTFUL ACCOUNTS.

The provision reflects the risks calculated on specific positions both in relation to insolvency proceedings in progress and cases for which legal action has been taken, or simply receivables outstanding for more than 360 days, as well as the estimate of expected losses on receivables, also in the absence of events that already indicate clear risks of loss, as provided for by international accounting standard IFRS 9.

PROVISION FOR PRODUCT WARRANTY RISKS.

The provision includes amounts for both specific risks, estimated on the basis of specific technical analyses, and generic risks. The latter are calculated on the production values of single plants, using the average warranty costs as a percentage of turnover in the last 5 years applied to the turnover of the period. The warranties granted are in line with legal provisions.

PROVISION FOR LEGAL RISKS.

These refer to specific cases assigned to legal attorneys with relation to ongoing litigation.

INVENTORY WRITE-DOWN PROVISION.

A generic amount has been set aside, calculated by applying a specific percentage write-down for bands of rotation indices in a systematic fashion, and a specific amount (especially for foreign subsidiaries) relating to the real possibility of disposal of the products.

2.3.27 PUBLIC GRANTS

Public grants are recognized when there is reasonable certainty that they will be received and that all the conditions referring to them have been satisfied. Grants relating to components of cost are recognized as revenues, but are systematically spread over a number of financial periods so as to match the recognition of the costs they are intended to offset. A grant relating to an asset is recognized as a revenue in constant amounts along the expected useful life of the asset in question.

In the event the Group receives a non-monetary grant, the asset and the relative grant are recognized at nominal value and released in the income statement in constant amounts along the expected useful life of the asset in question.

Italian Law 124 of 2017 provides for compulsory disclosure of subsidies, grants, appointments or economic advantages received from the Public Administration or, in any case, involving public resources.

From a systematic reading of the regulation, the facilitating measures aimed at all companies have not been included (by way of example but not limited to tax facilitating measures such as hyper-amortization, super-amortization, tax credit for research and development and facilitating measures such as the Wages Guarantee Fund) as these advantages are not aimed at a specific company.

During the year, the Group Italian companies only received State Aid that targeted all companies, and therefore for any details reference should be made to the National Register of State Aid.