Italy Italy is included in the IFAD GAAP Convergence Studies National Professional Organisation Website: Consiglio Nazionale Dottori Commercialisti e Esperti Contabili Response to IFAC Member Body Survey on Standard Setting and Regulation Update for April 2005 Update for January 2002 Update for May 2001 Financial Reporting Framework in Italy Adoption of IFRSs in Europe Effective in 2005 In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. EU countries have the option to: Require or permit IFRSs for unlisted companies. Require or permit IFRSs in parent company (unconsolidated) financial statements. Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007. Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007. The European IAS regulation applies not only to the 27 EU Member States but also to the three members of the European Economic Area (EEA) – Iceland, Liechtenstein, and Norway. Italy is an EU Member State. Consequently, Italian companies companies listed in an EU/EEA securities market will follow IFRSs starting in 2005. In January 2005, the European Commission published the results of a survey of the 25 EU member states and the 3 EEA member states on their plans regarding the four options above. For information on each country's plans, click to download: Table on Use of IFRS Options in 27 Member and 3 EEA States (PDF 52k) The European Commission has adopted the following wording for use in the notes to the accounts and in the audit reports of companies subject to EU Regulation 1606/2002/EC (the 'IAS regulation'): "in accordance with International Financial Reporting Standards as adopted by the EU" or "in accordance with IFRSs as adopted by the EU". Companies may also state, in a footnote, compliance with IFRSs as adopted by the IASB, if that is the case. Also see the April 2005 news item below. April 2005 On 25 February 2005, the Italian Council of Ministers approved a Legislative Decree regarding the options provided by Article 5 of Regulation 1606/2002 of the European Parliament (the EU Accounting Regulation) to permit or require the adoption of the International Financial Reporting Standards (which includes IASs and Interpretations) in respect of annual accounts and of non-publicly-traded companies. As a result, IFRSs will be applied in Italy as follows: Listed companies, issuers of financial instruments widely distributed among the public, banks, stock broking companies, fund management companies, regulated financial institutions Consolidated financial statements: IFRSs compulsory from 2005 Separate financial statements: IFRSs optional from 2005. IFRSs compulsory from 2006. Insurance companies Consolidated financial statements: IFRSs compulsory from 2005 Separate financial statements: IFRSs not permitted in 2005. IFRSs compulsory from 2006 only for listed companies that do not prepare consolidated financial statements Subsidiary and associated companies of the above companies, and other companies that prepare consolidated financial statements Consolidated financial statements: IFRSs optional from 2005 Separate financial statements: IFRSs optional from 2005 Companies other than the above Individual financial statements: IFRSs optional from a year to be determined by the Ministry for the Economy and Justice Small Companies preparing financial statements in abbreviated form Individual financial statements: IFRSs not permitted January 2002 On November 27, 2001, a new accounting standard setter - the Italian Accounting Committee (Organismo Italiano di Contabilità - OIC) - was established in Italy. The OIC has been constituted in the legal form of a Foundation, which is governed by a board of directors consisting of 15 members. The members have been appointed by a large representative group of Italian institutions, such as the Italian National Council of Accountants, the 'ABI' (National Association of Banks), the 'Confcommercio' (National Confederation of Commerce), the 'Assirevi' (Association of the Italian Auditors), Italian Government Accountants, Confindustria (Italian Confederation of Industry), Italian Stock Exchange, and others. The Board of Directors will soon appoint the members of the Executive Committee (7 members and 1 Chairman). The Executive Committee will also appoint the Technical-Scientific Committee, whose aim is to draft the national accounting principles to be approved by the Executive Committee. The Board of Directors' consist of: 6 members of the accounting profession, 5 preparers, 2 users, 1 representative of the Italian Stock Exchange and 1 representative of the Public Administration. The OIC will begin to operate in a few months when it has finished the formalities connected with legal recognition. The OIC will sit alongside the corresponding European body, EFRAG (European Finance Reporting Advisory Group) and the international body, the IASB. The principal activities of the OIC will be the following: issue accounting principles, for use in the preparation of financial statements for which the application of the international accounting principles has not been provided, by coordinating activity with the other European standard setters; issue accounting principles for the preparation of the financial statements of not for profit entities and of national and local public administrations; provide support in connection with the application of the international accounting principles in Italy. In the meantime, the accounting standards committee of the Italian National Councils of Accountants (the previous Italian accounting standard setter) has recently approved its last accounting principle: Accounting Principle 30 - Interim Financial Reporting. This accounting principle is substantially in line with IAS 34. May 2001 Update Financial reporting requirements for companies incorporated in Italy are set out in the Civil Code. Accounting Principles (AP), issued by the Accounting Standards Board (ASB) of the Italian National Council of Accountants, are considered as interpretations of the general principles stated in the Civil Code. In formulating the AP's, ASB gives due consideration to IAS, and try to integrate them to the extent possible, in light of the conditions and practices prevailing in Italy. The following AP's have been recently approved by the Italian National Council of Accountants: AP 28, Shareholders' Equity (approved October 2000) AP 29, Changes in Accounting Principles, Changes in Estimates, Fundamental Errors, Extraordinary Items, Events After the Balance Sheet Date (approved February 2001) AP 28 includes a recommendation for listed companies to include in financial statements earnings per share information. This information is consistent with IAS 33 disclosures. AP 29 differs from IAS 8 principally because only the allowed alternative treatment to account for the effects of the changes in accounting principles and the corrections of the fundamental errors is allowed. The benchmark treatment, recommended by IAS 8, was rejected by the Italian National Council of Accountants. This position follows a similar recommendation made by CONSOB (the Italian securities regulator) to listed companies in July 1999. In addition, the effect of changes in accounting principles and corrections of fundamental errors should be accounted for as extraordinary income/expense and not as profit and loss from ordinary activities. The inclusion of pro-forma condensed financial statements is also encouraged if the effects are relevant.