ACCOUNTING IN SELECTED COUNTRIES

1. ACCOUNTING IN SELECTED COUNTRIES ITALY

2. BRIEF OVERVIEW As in France, the interests of the government and tax authorities take precedence over those of shareholders, although the balance is now changing somewhat as major Italian companies become more involved in international financial markets. In Italy, the influences of company law (the Civil Code) and the taxation reg­ulations on accounting are similar to those in a number of other continental Euro­pean countries and especially France, Belgium, and Spain. Italian accounting in practice is in many respects comparable with that of its European neighbors despite the fact that the EU Fourth and Seventh Directives were only implemented, some-what belatedly, in 1991.

3. BRIEF OVERVIEW This is especially true for listed companies, which are sub­ject to additional legal and stock exchange regulations. Furthermore, a number of major MNEs make voluntary disclosures of information in response to interna­tional capital market pressures. While the origins of double-entry bookkeeping can be traced to Italy in the thirteenth century, the filing of annual accounts by limited liability companies has been required by law only since 1882. Following amendments to the Civil Code in 1942 and 1974, an increasingly stricter regime was imposed, which in 1991 was updated by the implementation of the EU Directives.

4. BRIEF OVERVIEW Given that the accounts are used as the basis for taxation, as in most conti­nental European countries, there has been a tradition of conservatism to minimize taxable profits and distributions to shareholders. It is also not uncommon for Ital­ian companies to present different sets of accounts for management, the taxation authorities, and shareholders, but the scope for this has been reduced in recent years. In this regard, listed companies have been subject to additional regulation primarily by the Commissione Nazionale per le Societa e la Borsa (CONSOB), which is more or less the equivalent of the U.S. SEC.

5. BRIEF OVERVIEW The CONSOB was established in 1974 and has been responsible for a number of important developments includ­ing the requirement that, in addition to the statutory audit, listed companies have a more extensive audit by an approved auditing firm. The CONSOB also had the authority to require the filing of consolidated accounts by groups of companies, but in practice companies were encouraged rather than required to do so.

6. BRIEF OVERVIEW Implementation of the Fourth and Seventh EU Directives has brought about a change of emphasis in Italian accounts with the introduction of the true and fair view concept and the requirement that consolidated accounts be presented. Italy has been slow to adopt the EU directives because the interests of external users of accounts and the protection of shareholders have not been considered as impor­tant as the need to support and develop the interests of major family or state-owned industrial enterprises. This has been reinforced by the legal heritage of the nine­teenth century, which has tended, like the Swiss,

7. BRIEF OVERVIEW to protect the right of companies to keep the secrets of their business from competitors and outsiders, including until recently external shareholders. The professional accounting bodies in Italy, the Consiglio Nazionale dei Dot­tori Commercialisti and the Consiglio Nazionali dei Ragioneri, are essentially advi­sory. There is a joint body that issues recommendations on accounting principles. The accounting bodies have recommended the use of IASB standards for matters not covered by them.

8. BRIEF OVERVIEW I t is also noteworthy that the CONSOB has recommended that listed companies adopt the profession's statements on accounting principles. However, listed companies were required to use IFRS starting in 2005.