New set of rules on annual financial statements, consolidated financial statements and related reports
The Italian Government has recently enacted a new set of rules relating to “annual financial statements, consolidated financial statements and related reports of certain types of undertakings” by means of Legislative Decree no. 139 of August 18, 2015 (the “Decree”), implementing Directive no. 2013/34/EU (the “Directive”).

The measures set out under the Decree concern the following three areas:

A. The introduction of a report on payments to the Italian government applicable to large sized companies and companies of public interest operating in the extractive and forestry industry sectors (Sections 2 – 5)

B. Amendments to the general regulation relating to annual financial statements set forth under the Italian Civil code which, among others, includes the directors’ duty to prepare and file “Rendiconto finanziario” (cash flow statements) along with financial statements(Section 6)

C. Amendments to the regulation relating to consolidated financial statements (Section 7)

The abovementioned integrations and amendments, as well as the other provisions set forth under the Decree, will enter into force on January 1, 2016 and will therefore be applicable to financial statements relating to the financial years starting from that date.

A. New rules on the reporting of payments to the Italian government

The directors of the following types of companies must draft a report on payments to the Italian government (the “Report”) on a yearly basis: (i) large-sized companies (i.e. companies which at the financial year end exceed at least two of the following three criteria: (a) a balance sheet total of EUR20,000,000; (b) a net turnover of EUR 40,000,000 and (c) an average number of employees during the financial year equal to 250) and (ii) companies of public interest (e.g. listed companies, insurance companies, banks, etc.) operating in the extractive and forestry industry sectors.

The directors shall prepare the Report in compliance with Section 3 of the Decree and shall file it with the competent Register of Enterprises within six months of the financial year end; where the directors fail to carry out such a filing or the information provided within the Report is untrue, the directors may be subject to imprisonment of up to one year and to a fine of up to EUR120,000.

As provided under the Directive, the Decree sets forth some exclusions (listed under Section 4 of the same Decree) from the duty to draft and file the Report.

B. New rules on the annual financial statements

Section 6 of the Decree introduces some interesting integrations and amendments to the regulation provided under the Italian Civil Code relating to annual financial statements.

The main novelties concern the introduction of (i) the “Rendiconto finanziario” (cash flow statements) and (ii) simplified rules for small-sized companies.

With reference to the first main novelty the draft financial statements will include, along with a balance sheet, a profit and loss account, and the explanatory cash flow statements.

Said cash flow statements will relate to the financial year to which the financial statements refer as well as the preceding financial year, and will provide:

  • An indication of the amount and composition of available cash at the beginning and end of the relevant financial year; and
  • an indication of the cash flows deriving from operative, investment and financing activities including transactions with shareholders to be indicated separately.

The second interesting novelty set out under the Decree consists of the introduction of simplified rules relating to the financial statements of small-sized companies.

According to these simplified rules companies which are already entitled to draft financial statements in short form pursuant to Section 2435-bis, and that meet particular dimensional conditions (i.e. during their first financial year or subsequently for two consecutive financial years they do not exceed the limits of at least two of the three following criteria: (a) a balance sheet total of EUR 350,000; (b) a net turnover of EUR 700,000; (c) an average number of employees during the financial year equal to five), will not be required to draft:

  • The abovementioned cash flow statements
  • An integrative notice, subject to the condition that specific information is provided at the end of the balance sheet
  • A directors’ report, subject to the condition that specific information is provided at the end of the balance sheet

C. New rules on consolidated financial statements

Section 7 of the Decree sets forth several amendments to Legislative Decree no. 127 of 1991 regarding consolidated financial statements.

The most significant amendment from a legal perspective is the increase of the thresholds triggering the duty to draft financial statements in a consolidated form. Specifically, the parent companies which, along with the controlled companies, have exceeded two of the following thresholds for two consecutive financial years shall prepare consolidated financial statements:

  • An active balance sheet of EUR20,000,000 (the threshold currently in force is EUR17,500,000)
  • Revenues from sales and performances of EUR40,000,000 (the threshold currently in force is EUR35,000,000)
  • An average number of employees during the financial year equal to 250

The other amendments relating to consolidated financial statements set out under the Decree concern the composition of single accounting items and are therefore not particularly interesting from a legal perspective.

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