Investment in Italy

Investment in ItalyIn the case of non-compliance, the regulators, i.e., the CONSOB, the BoI and the ISVAP, canimpose sanctions on preparers and auditors in the form of fines and other measures.4.7.1Differences between local GAAP and IFRSLocal GAAP and IFRS are not aligned on many different aspects, varying in degree of relativeimportance, and both sets of principles are subject to unpredictable regulatory changes.Therefore, should it be necessary to study these differences in any depth, this should bedone at the time the information is needed and only under expert guidance. The table whichfollows is intended solely for illustration of sample notions which could be of interest andtherefore cannot be considered exhaustive.LOCAL GAAPIFRSGeneralStatement of cash flows is highlyrecommended but not required.The format of the components of the financialstatements is prescribed by the Company law.Extraordinary items are disclosed on the faceof the income statements.Restatement of comparative is not allowed.The effects of changes in accounting policiesand corrections of errors are included in theincome statements of the current year.In addition to actions attributable toequity holders, net equity changes only inconsequence of the profit or loss of the period.Statement of cash flows is required.IFRS does not prescribe a standard format ofcomponents of the financial statements.No extraordinary items are presented in the incomestatements.Change in accounting policies and correction of errorscould lead to a restatement of comparatives.In addition to actions attributable to equity holders,net equity changes in consequence of profit or loss ofthe period and also for income or expense recognizeddirectly in equity (other comprehensive income).The existence of currently exercisable potentialvoting rights are not taken into consideration inorder to identify subsidiaries and associates.Special purposes entities (SPEs) are notincluded in the consolidation due to theabsence of participating interest.Minority interests are not part of net equity.ConsolidationFor identification of subsidiaries and associates,the existence of currently exercisable potentialvoting rights is taken into consideration.SPEs are consolidated where the substance ofthe relationship indicates control.Minority interests, i.e. non controlling interests,are part of net equity.AssetsAcquired intangible assetsAll intangible fixed assets are amortised andfor some of them the maximum useful lifeis five years. It is permitted, with certainrestrictions, to capitalise start-up costs (i.e.training), advertising costs and cost of issuingshares.Goodwill arising from a business combinationis amortised over its useful life (useful lifelonger than five years must be justified)Revaluations are not permitted unlessauthorised by special laws.If the criteria for capitalisation are satisfied,intangible assets must be amortised over theirestimated useful life. Costs of issuing shares arerecognised as deduction from equity.Goodwill arising from a business combination andintangible assets with an indefinite useful life arenot amortised but subject to impairment test atleast annually.Revaluations are possible only in a very fewcases.© 2012 KPMG S.p.A., KPMG Advisory S.p.A., KPMG Fides Servizi di Amministrazione S.p.A., KPMG Audit S.p.A., Italian limited liability share capital companies, and Studio Associato Consulenza legale e tributaria, anItalian professional partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.35