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The Transition from IFRSs to Local GAAP



Introduction

Legislative Decree No. 38 of 28 February 2005 (hereinafter the “Decree”) identifies the entities that are required or permitted to apply international accounting standards for the preparation of individual financial statements and/or consolidated financial statements.
For those who have exercised the option of applying IFRSs, the Decree provides for the possibility of withdrawing that choice in exceptional circumstances, as provided in Article 3, paragraph 3 and Article 4, paragraph 7, respectively, for consolidated and individual financial statements.
Exceptional circumstances, as a result of which there is withdrawal, should be adequately described in the notes, together with an indication of the effects on the representation of financial position and profit or loss. In any case, the financial statement for the financial year during which the revocation is deliberated is to be prepared in accordance with international accounting standards.
The international accounting standards define the principles for the first application (IFRS 1) but do not provide guidance in case they cease to be applied, or in the case of transition from the set of international accounting standards to national regulation supplemented by the national accounting standards (hereafter “national accounting regulation”). The definition of this guidance is left to individual jurisdictions.
The Decree does not provide how to determine the values to be taken as a basis for the individual/consolidated opening balance sheet prepared in accordance with the law and the national accounting standards following the revocation of the possibility to apply the IFRSs, and how the effects of withdrawal are to be represented in the financial statement.


Objective
The project aims to provide guidance and clarification on the application of the above-mentioned Article 3, paragraph 3 and Article 4, paragraph 7 of the Decree for individual financial statements and/or consolidated accounts prepared in accordance with the law and national accounting standards.


Content
More specifically, the project should deal with:
– the identification, by way of example, of cases that can lead to a return to national accounting regulation;
– the representation of the accounting effects of the transition from IFRSs to national accounting regulation:
the identification of the transition date and the resulting representation of comparative data to be provided in the first financial statements prepared in accordance with national accounting regulation;
the accounting policies under which to recognize the values in the first financial statements prepared according to the national accounting regulation;
– the disclosures to be provided in the notes due to the transition, in particular information about the presentation in the notes of the effects of the transition both in the financial statement for the year during which the revocation is decided and in the financial statement for the year following revocation.
The operational procedures that are identified will be applicable, with appropriate adaptations, both for the individual financial statements and for the consolidated accounts prepared in accordance with national accounting regulation.


Scope
The project is addressed to entities which are required or permitted to have applied international accounting standards for the preparation of individual financial statements and/or consolidated accounts and have to again prepare financial statements according to national accounting regulation.


Status of the project
On 30 October 2012 the draft of the national accounting standard “Transition to National Accounting Standards” has issued for public consultation. Any comments could be sent by 31 December 2012 to the e-mail staffoic@fondazioneoic.it or by fax at 0039 06.69766830.
The comments received by the consultation phase are available by clicking here.

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