Explanation of the effects of transition to International Financial Reporting Standards (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Reconciliation Statement of Consolidated Balance Sheet

(i) Reconciliation of the consolidated statement of financial position prepared in accordance with Italian GAAP with the consolidated statement of financial position prepared in accordance with IFRS as at January 1, 2017


	January 1, 2017 Italian GAAP (*)		IFRS adjustments			January 1, 2017 IFRS		Note
ASSETS
Non-current assets
Property, plant and equipment		115,924		5,781			121,705		43.4	(a)
Intangible assets and goodwill		4,233		(306	)		3,927		43.4	(b)
Equity-accounted investees		97		—			97
Other non-current receivables		2,137		—			2,137
Other non-current assets		—		1,323			1,323		43.4	(f)
Deferred tax assets		1,100		46			1,146		43.4	(c)

Total non current assets		123,491		6,844			130,335

Current assets
Inventories		78,384		12,630			91,014		43.4	(d)
Trade receivables		53,087		(12,949	)		40,138		43.4	(e)
Other current receivables		18,237		—			18,237
Other current assets		7,573		2,670			10,243		43.4	(f)
Current income tax assets		1,254		—			1,254
Gains on derivative financial instruments		223		—			223
Cash and cash equivalents		64,981		—			64,981

Total current assets		223,739		2,351			226,090

TOTAL ASSETS		347,230		9,195			356,425

EQUITY
Share capital		54,853		—			54,853
Reserves		16,439		7,626			24,065
Retained earnings		77,745		(16,109	)		61,636

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY		149,037		(8,483	)		140,554

Non-controlling interests		3,445		—			3,445

TOTAL EQUITY		152,482		(8,483	)		143,999		43.4	(g)

LIABILITIES
Non-current liabilities
Long-term borrowings		6,329		—			6,329
Employees’ leaving entitlement		17,791		1,635			19,426		43.4	(h)
Non-current contract liabilities		—		1,652			1,652		43.4	(j)
Provisions		13,253		—			13,253
Deferred income for capital grants		7,195		7,565			14,760		43.4	(i)
Deferred tax liabilities		1,763		—			1,763		43.4	(c)

Total non current liabilities		46,331		10,852			57,183

Current liabilities
Bank overdraft and short-term borrowings		18,152		6,275			24,427		43.4	(d)
Current portion of long-term borrowings		11,632		—			11,632
Trade payables		70,457		—			70,457
Other payables		29,407		—			29,407
Current contract liabilities		10,096		551			10,647		43.4	(j)
Provisions		5,687		—			5,687
Liabilities for current income tax		1,693		—			1,693
Losses on derivative financial instruments		1,293		—			1,293

Total current liabilities		148,417		6,826			155,243

TOTAL LIABILITIES		194,748		17,678			212,426

TOTAL EQUITY AND LIABILITIES		347,230		9,195			356,425

(*)

Figures reported reflect some IFRS reclassifications. For details see note 43.4 (k)

(ii) Reconciliation of the consolidated statement of financial position prepared in accordance with Italian GAAP with the consolidated statement of financial position prepared in accordance with IFRS as at December 31, 2017


	December 31, 2017 Italian GAAP (*)		IFRS adjustments			December 31, 2017 IFRS		Note
ASSETS
Non-current assets
Property, plant and equipment		107,917		7,273			115,190		43.4	(a)
Intangible assets and goodwill		5,514		323			5,837		43.4	(b)
Equity-accounted investees		79		—			79
Other non-current receivables		1,402		—			1,402
Other non-current assets		—		2,851			2,851		43.4	(f)
Deferred tax assets		626		—			626		43.4	(c)

Total non current assets		115,538		10,447			125,985

Current assets
Inventories		80,273		10,804			91,077		43.4	(d)
Trade receivables		46,852		(9,303	)		37,549		43.4	(e)
Other current receivables		12,910		—			12,910
Other current assets		4,404		2,828			7,232		43.4	(f)
Current income tax assets		2,413		—			2,413
Gains on derivative financial instruments		339		—			339
Cash and cash equivalents		55,035		—			55,035

Total current assets		202,226		4,329			206,555

TOTAL ASSETS		317,764		14,776			332,540

EQUITY
Share capital		54,853		—			54,853
Reserves		5,247		11,151			16,398
Retained earnings		46,346		(15,102	)		31,244

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY		106,446		(3,951	)		102,495

Non-controlling interests		2,039		—			2,039

TOTAL EQUITY		108,485		(3,951	)		104,534		43.4	(g)

LIABILITIES
Non-current liabilities
Long-term borrowings		20,877		—			20,877
Employees’ leaving entitlement		17,210		1,610			18,820		43.4	(h)
Non-current contract liabilities		—		2,560			2,560		43.4	(j)
Provisions		16,715		—			16,715
Deferred income for capital grants		6,809		6,962			13,771		43.4	(i)
Deferred tax liabilities		48		272			320		43.4	(c)

Total non current liabilities		61,659		11,404			73,063

Current liabilities
Bank overdraft and short-term borrowings		19,680		6,287			25,967		43.4	(d)
Current portion of long-term borrowings		4,840		—			4,840
Trade payables		76,035		—			76,035
Other payables		27,587		—			27,587
Current contract liabilities		11,937		1,036			12,973		43.4	(j)
Provisions		5,957		—			5,957
Liabilities for current income tax		1,317		—			1,317
Losses on derivative financial instruments		267		—			267

Total current liabilities		147,620		7,323			154,943

TOTAL LIABILITIES		209,279		18,727			228,006

TOTAL EQUITY AND LIABILITIES		317,764		14,776			332,540

(*)

Figures reported reflect some IFRS reclassifications. For details see note 43.4 (k)

Summary of Reconciliation Statement of Consolidated Income Statement

(iii) Reconciliation of the consolidated statement of profit or loss prepared in accordance with Italian GAAP with the consolidated statement of profit or loss prepared in accordance with IFRS for the year ended December 31, 2017


	2017 Italian GAAP (*)			IFRS adjustments			2017 IFRS			Note
Revenue		445,444			3,436			448,880			43.4	(l)
Cost of sales		(318,472	)		71			(318,401	)		43.4	(m)

Gross Profit		126,972			3,507			130,479

Other income		1,650			—			1,650
Selling expenses		(120,005	)		276			(119,729	)		43.4	(n)
Administrative expenses		(36,105	)		—			(36,105	)
Other expenses		(250	)		—			(250	)

Operating loss		(27,738	)		3,783			(23,955	)

Finance income		1,252			—			1,252
Finance costs		(6,042	)		(247	)		(6,289	)		43.4	(o)
Net exchange rate gains (losses)		3,252			(2,219	)		1,033			43.4	(p)

Net finance costs		(1,538	)		(2,466	)		(4,004	)

Loss before tax		(29,276	)		1,317			(27,959	)

Income tax expense		(2,576	)		(310	)		(2,886	)		43.4	(q)

Loss for the year		(31,852	)		1,007			(30,845	)

Loss attributable to:
Owners of the Company		(31,399	)		1,007			(30,392	)
Non-controlling interests		(453	)		—			(453	)

Loss per share
Basic loss per share		(0.57	)					(0.55	)
Diluted loss per share		(0.57	)					(0.55	)

(*)

Figures reported reflect some IFRS reclassifications. For details see note 43.4 (r)

Summary of Reconciliation Statement of Consolidated Comprehensive Income

(iv) Reconciliation of the consolidated statement of comprehensive income prepared in accordance with Italian GAAP with the consolidated statement of comprehensive income prepared in accordance with IFRS for the year ended December 31, 2018


	2017 Italian GAAP			IFRS adjustments			2017 IFRS			Note
Loss for the year		(31,852	)		1,007			(30,845	)

Other comprehensive income

Items that will not be reclassified to profit or loss
Actuarial losses on employees’ leaving entitlement		—			(108	)		(108	)		43.4	(s)
Tax impact		—			(8	)		(8	)

		—			(116	)		(116	)

Total		—			(116	)		(116	)

Items that are or maybe reclassified subsequently to profit or loss
Exchange rate differences on translation of foreign operations		(11,419	)		3,641			(7,778	)		43.4	(t)
Tax impact		—			—			—

Total		(11,419	)		3,641			(7,778	)

Other comprehensive loss for the year, net of tax		(11,419	)		3,525			(7,894	)

Total comprehensive loss for the year		(43,271	)		4,532			(38,739	)

Total comprehensive loss attributable to:
Owners of the Company		(42,591	)					(38,059	)
Non-controlling interests		(680	)					(680	)

Reconciliation of Equit, Loss and Other Comprehensive Loss Between Italian GAAP and IFRS

(v) Reconciliation of equity as at January 1, 2017 and December 31, 2017, loss and other comprehensive loss for the year ended December 31, 2017 between Italian GAAP and IFRS


	Equity January 1, 2017			Loss 2017			Other comprehensive loss 2017			Equity December 31, 2017			Note
Balance in accordance with Italian Gaap		152,482			(31,852	)		—			108,485

Attributable to Owners of the Company		149,037			(31,399	)					106,446
Attributable to Non-controlling interests		3,445			(453	)					2,039

IFRS Adjustments
Functional currency adjustment		6,180			(2,219	)		3,641			7,602			43.4	(a)
Costs not eligible for capitalization included in property, plant and equipment		(399	)		70			—			(329	)		43.4	(a)
Costs not eligible for capitalization included in intagible assets		(306	)		306			—			—			43.4	(b)
Write-off of amortization of goodwill		—			323			—			323			43.4	(b)
Revenue of finished goods derecognised		(4,364	)		1,308			—			(3,056	)		43.4	(d)
Deferred costs for slotting fees		204			1,195			—			1,399			43.4	(f)
Deferred revenues for Natuzzi Display System		(1,594	)		(1,042	)		—			(2,636	)		43.4	(j)
Deferred costs for Natuzzi Display System		1,229			802			—			2,031			43.4	(f)
Deferred revenues for Service Type Warranty		(609	)		(351	)		—			(960	)		43.4	(j)
Deferred costs for Service Type Warranty		330			189			—			519			43.4	(f)
IAS 19 adjustment - employees’ leaving entitlement		(1,635	)		133			(108	)		(1,610	)		43.4	(h)
Government Grants		(7,565	)		603			—			(6,962	)		43.4	(i)
Tax effects of IFRS adjustments		46			(310	)		(8	)		(272	)		43.4	(c)

Total IFRS adjustments		(8,483	)		1,007			3,525			(3,951	)

Balance in accordance with IFRS		143,999			(30,845	)		3,525			104,534

Attributable to Owners of the Company		140,554			(30,392	)					102,495
Attributable to Non-controlling interests		3,445			(453	)					2,039

Summary of Reconciliation Consolidated Shareholders Equity and Consolidated Economic Result

(vi) Consolidated statement of changes in equity for the year ended December 31, 2017


	Share Capital amount		Translation reserve			IAS 19 reserve			Other reserves		Retained earnings			Equity attributable to owners of the Company			Equity attributable to owner Non- controlling interests			Total equity
Balance as at January 1, 2017 as per Italian Gaap		54,853		4,980			—			11,459		77,745			149,037			3,445			152,482

IFRS adjustments for First Time Adoption		—		7,626			—			—		(16,109	)		(8,483	)		—			(8,483	)

Balance as at January 1, 2017 as per IFRS		54,853		12,606			—			11,459		61,636			140,554			3,445			143,999

Dividends Distribution		—		—			—			—		—			—			(726	)		(726	)
Loss for the period		—		—			—			—		(30,392	)		(30,392	)		(453	)		(30,845	)
Other comprehensive loss for the period		—		(7,551	)		(116	)		—		—			(7,667	)		(227	)		(7,894	)

Balance as at December 31, 2017 as per IFRS		54,853		5,055			(116	)		11,459		31,244			102,495			2,039			104,534

Schedule of Reconciling ITA GAAP and IFRS Consolidated Statement of Cash Flows

(vii) Reconciliation of the consolidated statement of cash flows prepared in accordance with Italian GAAP with the consolidated statement of cash flows prepared in accordance with IFRS for the year ended December 31, 2017


	2017 Italian GAAP			IFRS adjustments			2017 IFRS			Note
Cash flows from operating activities:
Loss for the period		(31,852	)		1,007			(30,845	)

Adjustments for:
Depreciation		12,823			(1,962	)		10,861			43.4	(u)
Amortization		—			1,569			1,569			43.4	(u)
Interest expenses		—			4,639			4,639			43.4	(u)
Share of profit (loss) of equity-accounted investees, net of tax		—			(18	)		(18	)
(Gain) loss on sale of property, plant and equipment		73			—			73
Deferred income taxes		(1,241	)		1,241			—			43.4	(u)
Unrealized foreign exchange gains (losses)		(1,141	)		—			(1,141	)		43.4	(u)
Deferred income for capital grants		(386	)		(603	)		(989	)		43.4	(u)
Tax expense		—			2,886			2,886			43.4	(u)

Total adjustment		10,128			7,752			17,880

Changes in:
Inventories		(3,213	)		1,826			(1,387	)		43.4	(u)
Trade and other receivables		10,386			(4,663	)		5,723			43.4	(u)
Other assets		407			1,077			1,484			43.4	(u)
Trade and other payables		10,643			1,211			11,854
Contract liabilities		—			3,235			3,235			43.4	(u)
Provisions		—			3,732			3,732			43.4	(u)
Liabilities for current income taxes		(377	)		377			—
Salaries, wages and related liabilities		4,578			(4,578	)		—			43.4	(u)
Other liabilities net		3,264			(3,264	)		—			43.4	(u)
One-time termination benefit payments		(8,272	)		—			(8,272	)
Employees’ leaving entitlement		(581	)		(25	)		(606	)

Total changes		16,835			(1,072	)		15,763

Cash provided by (used in) operating activities		(4,889	)		7,687			2,798

Interest paid		—			(2,821	)		(2,821	)		43.4	(u)
Income taxes paid		—			(4,878	)		(4,878	)		43.4	(u)

Net cash used in operating activities		(4,889	)		(12	)		(4,901	)

Cash flows from investing activities:
Property, plant and equipment:
Additions		(6,708	)		—			(6,708	)
Disposals		760			—			760
Intangible assets		(845	)		—			(845	)
Purchase of business, net of cash acquired		(3,558	)		—			(3,558	)
Dividends distribution to Non-controlling interests		(1,349	)		1,349			—			43.4	(u)

Net cash used in investing activities		(11,700	)		1,349			(10,351	)

Cash flows from financing activities:
Long-term borrowings:
Proceeds		12,500			—			12,500
Repayments		(4,744	)		—			(4,744	)
Short-term borrowings		1,528			4,428			5,956			43.4	(u)
Dividends distribution to Non-controlling interests		—			(1,349	)		(1,349	)		43.4	(u)

Net cash provided by financing activities		9,284			3,079			12,363

Increase (decrease) in cash and cash equivalents		(7,305	)		4,416			(2,889	)

Cash and cash equivalents as at January 1, 2017 (*)		64,981			(4,416	)		60,565			43.4	(u)
Effect of movements in excahnge rates on cash held		(2,641	)		—			(2,641	)

*Cash and cash equivalents as at December 31 ()**		55,035			—			55,035

(*)	As at January 1, 2017 and December 31, 2017, cash and cash equivalents includes bank overdrafts of 4,416 and nil, respectively, that are repayble on demand and from an integral part of the Group’s cash management.

Summary of Impacts of IFRS Adjustments for Property, Plant and Equipment

The following tables show the impacts of the IFRS adjustments for property, plant and equipment:


	01/01/2017			31/12/17
Balance as per Italian GAAP		115,924			107,917
Deemed cost for certain buildings		—			—
Functional currency adjustment		6,180			7,602
Costs not eligible for capitalization		(399	)		(329	)

Balance as per IFRS		121,705			115,190

Summary of Impacts of IFRS Adjustments for Intangible Assets and Goodwill

The following tables show the effects of the IFRS adjustments for intangible assets and goodwill:


	Intangible assets			Goodwill		Total

Balance as at January 1, 2017 as per Italian GAAP		2,312			1,921		4,233
Write-off of depreciation of goodwill		—			—		—
Costs not eligible for capitalization		(306	)		—		(306	)

Balance as at January 1, 2017 as per IFRS		2,006			1,921		3,927

Balance as at December 31, 2017 as per Italian GAAP		1,991			3,523		5,514
Write-off of depreciation of goodwill		—			323		323
Costs not eligible for capitalization		—			—		—

Balance as at December 31, 2017 as per IFRS		1,991			3,846		5,837

Summary of Impacts of IFRS Adjustments for Deferred Assets and Liabilities

The following tables show the impacts of the IFRS adjustments for deferred assets and liabilities.


January 1, 2017	Italian GAAP (a)			IFRS adjustments (b)			IFRS (a+b)

Deferred tax assets		2,098			459			2,557
Deferred tax liabilities compensated		(998	)		(413	)		(1,411	)

Net deferred tax assets		1,100			46			1,146

Deferred tax liabilities		(1,763	)		—			(1,763	)


December 31, 2017	Italian GAAP (a)			IFRS adjustments (b)			IFRS (a+b)

Deferred tax assets		1,897			759			2,656
Deferred tax liabilities compensated		(1,271	)		(759	)		(2,030	)

Net deferred tax assets		626			—			626

Deferred tax liabilities		(48	)		(272	)		(320	)

Income tax rate applied are disclosed in note 36.

The IFRS adjustments that give rise to deferred tax assets and deferred tax liabilities as at January 1, 2017 and December 31, 2017 are presented below.


Deferred tax assets	01/01/17			31/12/17
Deferred revenues and costs for Natuzzi Display System		459			759

Net deferred tax assets (a)		459			759


Deferred tax liabilities

Write-off of amortization of goodwill		—			(33	)
Deferred revenues and costs for Natuzzi Display System		(354	)		(585	)
Deferred costs for slotting fees		(59	)		(404	)
IAS 19 adjustment—employees’ leaving entitlement		—			(9	)

Total deferred tax liabilities (b)		(413	)		(1,031	)

Net deferred tax assets (liabilities) (a+b)		46			(272	)

Summary of Impact of IFRS Adjustments for Unrecognised Deferred Tax Assets

Deferred tax assets on IFRS adjustments have not been recognised in respect of the following items, because it is not probable that future taxable profit will be available against which the Group can use the benefits therefrom.


Unrecognised deferred tax assets	01/01/17		31/12/17
Revenue of finished goods derecognised		1,258		881
Government Grants		476		403
IAS 19 adjustment - employees’ leaving entitlement		392		357
Costs not eligible for capitalization included in property, plant and equipment		115		95
Costs not eligible for capitalization included in intangible assets		88		—
Deferred revenues and costs for Service Type Warranty		81		129

Total unrecognised deferred tax assets		2,410		1,865

Summary of Impacts of IFRS Adjustments for Inventories

The following tables show the impacts of the IFRS adjustments for inventories:


	01/01/2017		31/12/17
Balance as per Italian GAAP		78,384		80,273
Revenue of finished goods derecognised		12,630		10,804

Balance as per IFRS		91,014		91,077

Summary of Impacts of IFRS Adjustments for Trade Receivables

The following tables show the impacts of the IFRS adjustments for trade receivables:


	01/01/2017			31/12/17
Balance as per Italian GAAP		53,087			46,852
Recognition of trade receivables		6,275			6,287
Revenue of finished goods derecognised		(19,224	)		(15,590	)

Balance as per IFRS		40,138			37,549

Summary of Impacts of IFRS Adjustments for Other Assets (Current and Non-current)

(f) Other assets (current and non-current)


	01/01/2017			31/12/17
Balance as per Italian GAAP		7,573			4,404
Delivery costs and commission expenses for sales derecognized		2,230			1,730
Deferred costs for Natuzzi Display System		1,229			2,031
Deferred costs for Service Type Warranty		330			519
Deferred costs for slotting fees		204			1,399

Balance as per IFRS		11,566			10,083
Less non-current portion as per IFRS		(1,323	)		(2,851	)

Current portion as per IFRS		10,243			7,232

Summary of Impacts of IFRS Adjustments for Employee's Leaving Entitlement

The following tables show the effects of the IFRS adjustments for the employee’s leaving entitlement:


	01/01/2017		31/12/17
Balance as per Italian GAAP		17,791		17,210
IAS 19 adjustment - employees’ leaving entitlement		1,635		1,610

Balance as per IFRS		19,426		18,820

Summary of Impacts of IFRS Adjustments for Deferred Income for Capital Grants

The following tables show the effects of the IFRS adjustments for deferred income for capital grants:


	01/01/2017		31/12/17
Balance as per Italian GAAP		7,195		6,809
Government Grants		7,565		6,962

Balance as per IFRS		14,760		13,771

Summary of Impacts of IFRS Adjustments for Contract Liabilities (Current and Non-current)

The following tables show the effects of the IFRS adjustments for contract liabilities:


	01/01/2017			31/12/17
Balance as per Italian GAAP		10,096			11,937
Deferred revenue for Natuzzi Display System		1,594			2,636
Deferred revenue for Service Type Warranty		609			960

Balance as per IFRS		12,299			15,533
Less non-current portion as per IFRS		(1,652	)		(2,560	)

Current portion as per IFRS		10,647			12,973

Summary of Impacts of IFRS Adjustments on Revenue

The effects of the IFRS adjustments on revenue are indicated below:


Balance for the year ended December 31, 2017 as per Italian GAAP	445,444
Effects of revenue of finished goods derecognised	3,634
Effects of deferred costs for slotting fees	1,195
Effects of deferred revenue for Natuzzi Display System	(1,042	)
Effects of deferred revenue for Service Type Warranty	(351	)

Balance for the year ended December 31, 2017 as per IFRS	448,880

Summary of Effects of IFRS Adjustments on Cost of Sales

The effects of the IFRS adjustments on cost of sales are illustrated below:


Balance for the year ended December 31, 2017 as per Italian GAAP	(318,472	)
Effects on inventories for revenue derecognised	(1,826	)
Effects of deferred costs for Natuzzi Display System	802
Effects of deferred costs for Service Type Warranty	189
Amortization charge of capital grants	603
IAS 19 adjustment - employees’ leaving entitlement	303

Balance for the year ended December 31, 2017 as per IFRS	(318,401	)

Summary of Effects of IFRS Adjustments on Selling Expenses

The effects of the IFRS adjustments on the selling expenses are indicated below:


Balance for the year ended December 31, 2017 as per Italian GAAP	(120,005	)
Derecognition of shipping and handling costs	(500	)
Elimination of amortization of goodwill	323
Elimination of amortization of advertising costs	306
Elimination of amortization of advisory costs	70
IAS 19 adjustment - employees’ leaving entitlement	77

Balance for the year ended December 31, 2017 as per IFRS	(119,729	)

Summary of Effects of IFRS Adjustments on Finance Costs

The effects of the IFRS adjustments on finance costs are indicated below:


Balance for the year ended December 31, 2017 as per Italian GAAP	(6,042	)
IAS 19 adjustment - employees’ leaving entitlement	(247	)

Balance for the year ended December 31, 2017 as per IFRS	(6,289	)

Summary of Effects of IFRS Adjustments on Net Exchange Rate Gains (Losses)

The effects of the IFRS adjustments on net exchange rate gains (losses) are indicated below:


Balance for the year ended December 31, 2017 as per Italian GAAP	3,252
Functional currency adjustment	(2,219	)

Balance for the year ended December 31, 2017 as per IFRS	1,033

Summary of Effects of IFRS Adjustments on Income Tax Expense

Further, total income taxes for the year ended December 31, 2017 are allocated as follows:


	Italian GAAP (a)			IFRS adjustments (b)			IFRS (a+b)

Current:
- Domestic		(40	)		—			(40	)
- Foreign		(3,777	)		—			(3,777	)

Total (a)		(3,817	)		—			(3,817	)


	Italian GAAP (a)			IFRS adjustments (b)			IFRS (a+b)

Deferred:
- Domestic		—			(310	)		(310	)
- Foreign		1,241			—			1,241

Total (b)		1,241			(310	)		931

Total (a+b)		(2,576	)		(310	)		(2,886	)

Summary of Impact of IFRS Adjustments on Exchange Rate Differences on Translation of Foreign Operations

The impact of the IFRS adjustments on the exchange rate differences on translation of the foreign operations is as follows:


Balance for the year ended December 31, 2017 as per Italian GAAP	(11,419	)
Functional currency adjustment	3,641

Balance for the year ended December 31, 2017 as per IFRS	(7,778	)