13. Trade receivables

Trade receivables are analyzed as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

 

Total

Non-current

Current

Total

Non-current

Current

Associates and joint ventures

122,802

-

122,802

115,450

-

115,450

Third parties

1,020,667

-

1,020,667

936,892

-

936,892

Receivables on construction contracts

9,330

-

9,330

4,395

-

4,395

Total gross receivables

1,152,799

-

1,152,799

1,056,737

-

1,056,737

Provision for impairment of receivables

(53,872)

-

(53,872)

(57,068)

(57,068)

1,098,927

-

1,098,927

999,669

-

999,669

Receivables on construction contracts, relating to the Real Estate Sector, represent the excess of costs incurred and profit recognized, equal to Euros 9,780 thousand at December 31, 2007 (Euros 66,632 thousand at December 31, 2006) over advances received against progress billings on contracts in progress, equal to Euros 450 thousand at December 31, 2007 (Euros 62,237 thousand at December 31, 2006).

Total trade receivables of Euros 1,152,799 thousand (Euros 1,056,737 thousand at December 31, 2006) include overdue receivables amounting to Euros 260,145 thousand (Euros 213,426 thousand at December 31, 2006).

Impairment losses on overdue and current receivables are recognized according to the Group’s policies described in the paragraph on credit risk under “Financial risk management policies”.

Receivables that are impaired include both significant single positions written down individually and positions with similar characteristics by group of credit risk written down on a collective basis.

The movements in the provision for impairment of trade receivables is as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

Beginning balance

57,068

59,698

Exchange differences

150

(969)

Accruals

15,290

11,083

Utilization / release

(20,110)

(13,916)

Change in scope of consolidation

1,474

1,172

Ending balance

53,872

57,068

The accrual to the provision for impairment of trade receivables is charged to the income statement in “Other expenses” (Note 33).

The carrying amount of trade receivables is regarded as approximating fair value.

It should be noted that a long-term loan contract signed in December 2007 is guaranteed by the Pirelli Real Estate group with receivables (existing or future monetary receivables) from some clients for a total amount of Euros 86,392 thousand, which is guaranteed for Euros 54,318 thousand and pledged for Euros 32,074 thousand.

14. Other receivables

Other receivables can be analyzed as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

Total

Non-current

Current

Total

Non-current

Current

Associates and joint ventures

- financial receivables

535,999

520,079

15,920

333,804

333,561

243

- other receivables

4,292

965

3,327

11,108

169

10,939

Financial receivables from third parties

92,087

88,577

3,510

246,896

219,935

26,961

Trade and other accrued income and prepaid expenses/third parties

21,143

10

21,133

18,949

249

18,700

Financial accrued income and prepaid expenses

3,054

1,342

1,712

13,542

7,999

5,543

Receivables from employees

7,297

2,839

4,458

6,882

3,373

3,509

Receivables from social security agencies

2,923

-

2,923

2,856

-

2,856

Receivables from tax authorities non-cur.
inc. taxes

99,353

8,860

90,493

74,592

10,348

64,244

Receivables for junior notes

11,307

11,307

-

94,177

94,177

-

Other receivables

143,369

42,525

100,844

265,607

39,577

226,030

Total gross other receivables

920,824

676,504

244,320

1,068,413

709,388

359,025

Provision for impairment of other receivables

(6,455)

(3,610)

(2,845)

(6,380)

(3,560)

(2,820)

914,369

672,894

241,475

1,062,033

705,828

356,205

The carrying amount of current and non-current other receivables is regarded as approximating fair value. Particularly with regard to non-performing loans (included under “other receivables”) that, as described under the accounting policies, are accounted for at amortized cost using the effective interest method, the amount recognized is equal to the present value of future cash flows according to the most recent business plan available discounted at the original effective interest rate.

It is regarded that the carrying amount of such receivables, calculated as described above, approximates their fair value at the date of December 31, 2007 since the ordinary effective interest
rate used to compute present value is still representative today of a market rate that would be applied by third parties to value the portfolio. Such rate is determined by considering the characteristics of this portfolio (such as risk, reference markets, etc.) which company management responsible for these valuations still considers to be essentially valid at the present time.

Non-current financial receivables from associates and joint ventures, equal to Euros 520,079 thousand, refer to the Real Estate Sector and are classified as non-current since the collection times, connected with the plans for the disposal of the properties held directly and indirectly by the companies, will be concluded on average over a period between two and five years. These loans are made at rates in line with those applied by the major market operators except for non-interest bearing loans made to certain non-operating companies or companies in a stage of transition for a total amount of Euros 19,368 thousand at December 31, 2007 (Euros 20,276 thousand at December 31, 2006).

The decrease of non current financial receivables from third parties from the end of last year is mainly on account of the assignment to Goldman Sachs International Bank of the vendor loan granted to Prysmian (Lux) S.à.r.l. in relation to the sale of Pirelli’s Energy and Telecom Cables and Systems businesses in July 2005 to Goldman Sachs Capital Partners by Pirelli (Euros 145,742 thousand).

Receivables for junior notes relate to the Real Estate Sector. The decrease from the end of 2006 can be ascribed to the sale of junior notes from the securitization of a non-performing loan portfolio of the former Banco di Sicilia purchased in prior year.

Other current receivables refer to non-performing loan portfolios of the Real Estate Sector (Euros 17,732 thousand) and regional grants that will be received from the Campania region to aid buyers of property units owned by the company Geolidro S.p.A. (Euros 9,740 thousand). The decrease from December 2006 is mostly attributable to the utilization of the advances made at the end of 2006 (Euros 140,000 thousand) for the acquisition of Deutsche Grundvermogen AG (DGAG).

The gross amount of other receivables written down in accordance with Group policies is Euros 21,756 thousand at December 31, 2007.

The movements in the provision for impairment of other receivables is as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

Non-current

Current

Non-current

Current

Beginning balance

3,560

2,820

-

132

Exchange differences

-

(6)

-

-

Accruals

50

79

2,578

506

Utilization/release

-

(132)

-

-

Change in scope of consolidation

-

84

982

2,182

Ending balance

3,610

2,845

3,560

2,820

15. Tax receivables

Tax receivables amount to Euros 55,559 thousand (of which Euros 12,278 thousand is non-current) compared to Euros 44,349 thousand at December 31, 2006 (of which Euros 10,917 thousand is non-current).