171 SEPARATE FINANCIAL STATEMENTS170 SEPARATE FINANCIAL STATEMENTS MONCLER GROUP 2022

reflect the actual number of incentives for which the continued ser- vice conditions are met and the achievement of non-market condi- tions, so that the final amount recognised as an expense is based on the number of incentives that fulfill these conditions at the vest- ing date. In case the incentives granted as share-based payments whose conditions are not to be considered to maturity, the fair val- ue at the grant date of the share-based payment is measured to re- flect such conditions. With reference to the non-vesting conditions, any differences between amounts at the grant date and the actual amounts will not have any impact on the financial statements.

The fair value of the amount payable to employees related to share appreciation rights, settled in cash, is recognised as an ex- pense with a corresponding increase in liabilities over the period during which the employees unconditionally become entitled to receive the payment. The liability is measured at year-end and the settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognised in profit or loss for the year.

2.10 PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges are recognised when the Compa- ny has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources will be required to settle the obligation and where the amount of the obli- gation can be reliably estimated.

Changes in estimates are recognised in the income state- ment in the period in which they occur.

2.11 REVENUE RECOGNITION

Based on the five-step model introduced by IFRS 15, the Group rec- ognises revenues after identifying the contracts with its clients and the related services to be provided (transfer of goods and/or ser- vices), determining the consideration which it believes it is entitled to in exchange for the provision of each of these services and as- sessing the manner in which these services are provided (at a giv- en time or over time). Variable components of the consideration are recognised in the financial statements only when it is highly proba- ble that there will be no significant adjustment to the amount of rev- enue recognised in the future.

Royalties received from licensee are accrued as earned on the basis of the terms of the relevant royalty agreement which is typically based on sales volumes.

2.12 BORROWING COSTS

Borrowing costs are recognised on an accrual basis taking into consideration interest accrued on the net carrying amount of finan- cial assets and liabilities using the effective interest rate method.

2.13 TAXATION

Tax expense recognised in the consolidated income statement rep- resents the aggregate amount related to current tax and deferred tax.

Current tax is determined in accordance with enforced rules established by local tax authorities. Current taxes are recognised in the consolidated income statement for the period, except to the ex- tent that the tax arises from transactions or events which are rec- ognised directly either in equity or in other comprehensive income.

Deferred tax liabilities and assets are determined based on temporary taxable or deductible differences arising between the tax bases of assets and liabilities and their carrying amounts in the Company s financial statements. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legally enforceable right to offset the amounts.

Deferred tax liabilities and assets are determined using tax rates that have been enacted by the reporting date and are expect- ed to be enforced when the related deferred income tax asset is re-

value of the derivative financial instrument is recognised immedi- ately in the profit/(loss) for the period.

If the hedge ceases to meet the eligibility criteria or the hedging instrument is sold, matures or is exercised, hedge ac- counting ceases prospectively. When hedge accounting for cash flow hedges ceases, the accrued amount in the cash flow hedge reserve remains in equity until, in the case of a hedge of a trans- action that results in the recognition of a non-financial asset or non-financial liability, it is included in the cost of the non-finan- cial asset or non-financial liability on initial recognition or, in the case of other cash flow hedges, it is reclassified in profit or loss for the period in the same period or periods in which the hedged expected future cash flows affects profit/(loss) for the period.

If no more hedged future cash flows are expected, the amount shall be reclassified immediately from the cash flow hedge reserve and the reserve for hedging costs to profit/(loss) for the period.

If hedge accounting cannot be applied, gains or loss- es arising from the fair value measurement of a derivative finan- cial instrument are immediately recognised in income statement.

2.8 EMPLOYEE BENEFITS

Short-term employee benefits, such as wages, salaries, social se- curity contributions, paid leave and annual leave due within twelve months of the statement of financial position date and all other fringe benefits are recognised in the year in which the service is rendered by the employee.

Benefits granted to employees which are payable on or after the termination of employment through defined benefit and contri- bution plans are recognised over the vesting period.

DEFINED BENEFIT SCHEMES Defined benefit schemes are retirement plans determined based on employees remuneration and years of service.

The Company s obligation to contribute to employees bene- fit plans and the related current service cost is determined by using an actuarial valuation defined as the projected unit credit method. The cumulative net amount of all actuarial gains and losses are rec- ognised in equity within other comprehensive income.

With reference to defined benefit plans, the increase in pres- ent value of the defined benefit obligation for employee service in prior periods (past service cost) is accounted as an expense on a straight-line basis over the average period until the benefits be- come vested.

The amount recognised as a liability under the defined ben- efit plans is the present value of the related obligation, taking into consideration expenses to be recognised in future periods for em- ployee service in prior periods.

DEFINED CONTRIBUTION SCHEMES Contribution made to a defined contribution plan is recognised as an expense in the income statement in the period in which the em- ployees render the related service.

Up to 31 December 2006 Italian employees were eligible to defined benefit schemes referred as post-employment benefit ( TFR ). With the act n. 296 as of 27 December 2006 and subse- quent decrees ( Pension Reform ) issued in early 2007, the rules and the treatment of TFR scheme were changed. Starting from con- tribution vested on or after 1 January 2007 and not yet paid at the reporting date, referring to entities with more than 50 employees, Italian post-employment benefits is recognised as a defined con- tribution plan. The contribution vested up to 31 December 2006 is still recognised as a defined benefit plan and accounted for using actuarial assumptions.

2.9 SHARE-BASED PAYMENTS

The fair value at grant date of the incentives granted to employ- ees in the form of share-based payments that are equity settled is usually included in expenses, with a matching increase in equi- ty, over the period during which the employees obtain the incen- tives rights. The amount recognised as an expense is adjusted to