The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Italy

Abstract

We examine the recent changes that have affected the Italian accounting scenario after the adoption of the IFRS and the enactment of the European accounting system. In particular, we have focused our attention on the decision of the legislature to enlarge the mandatory adoption of IFRS to non-listed companies and to individual financial statements (FS). At the same time, we have observed the changes determined by the EU Directive 2013/34 on the Italian Civil Code and the FS legislation. Both set of changes are describing a process under which the Italian accounting rules are moving towards the international accounting standards and their framework, contents and methods. Therefore, the main differences among national rules and IFRS are grounded on the measurement rules and the role played by the historical cost principles and the strict and detailed regulation of the Balance sheet and Income statement formats.

Keywords:

• Italy
• accounting regulation
• IFRS Adoption
• EU Accounting Directive 2013/34/EU

Notes

1 OIC (2008), Hypothesis for enactment of EU Directives 2001/65, 2003/51 and 2006/46 with modifications to the C.C. (June 8) and OIC 2008, Illustrative Report (June 8).

2 Regarding the identification of operational dimensions of businesses, the approach followed by European directives and, in particular, Directive n. 34, 2013 is quantitative, involving the definition of threshold parameters. Toward this end, the Directive in question states that microbusinesses are those that fall below two of the following three parameters: balance sheet total of 350,000 Euro; net sales and performance revenues of 700,000 Euro; average number of employees employed during the year: 10. For small businesses, these threshold parameters become, respectively, 4,000,000 Euro for the balance sheet total, 8,000,000 Euro for net revenues and 50 for average number of employees. The medium-sized business level calls for a balance sheet total of 20,000,000 Euro, net revenues 40,000,000 Euro and average number of employees 250. Finally, large businesses are identified by values greater than two of the three threshold parameters for medium-sized businesses. A similar system of thresholds is indicated in article 3 of Directive n. 34, 2013 in the case of company groups, divided into small groups, medium-sized groups and large groups.

3 Italy and Cyprus were the only two countries within the European Union to make use of the faculty granted by article 5 of Regulation n. 1606, 2002 to extend application of IFRS to other financial statements and categories of subjects other than those with securities traded in a market regulated by a member State. The extension was established with Leg. Dec. n. 38 in 2005.