3.3 International Accounting Standards and/or interpretations that have been issued but not yet in force and/or endorsed

Pursuant to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, the new standards and/or interpretations that have been issued but are not yet in force or not yet endorsed by the European Union, and which are therefore not applicable, are mentioned and described briefly as follows.

None of these standards and interpretations has been early adopted by the Group.

Amendments to IFRS 7 – Financial Instruments: Disclosures – transfer of financial assets

These amendments seek to improve financial statement disclosures and consequently improve the transparency and comparability of transactions involving the transfer of financial assets (e.g. securitisations), including the possible effects of risks for which the transferor remains liable. These amendments were endorsed by the European Union in November 2011 (EC Regulation 1205/2011) and are applicable from January 1, 2012. They will have no impact on the Group consolidated financial statements.

IFRS 9 – Financial Instruments (issued in November 2009 and October 2010) and amendments (issued in December 2011)

IFRS 9 represents the completion of the first of three stages of the planned replacement of IAS 39 – Financial Statements: Recognition and Measurement, which has the principal aim of reducing its complexity. In the version issued by the IASB in November 2009, the scope of IFRS 9 was restricted to financial assets only. In October 2010 the IASB amended IFRS 9 by adding the requirements for classification and measurement of financial liabilities, thereby completing the first phase of the project.

The second phase of the project, concerning the impairment of financial instruments, and the third phase, concerning hedge accounting, led to the issuance of two Exposure Drafts in November 2009 and December 2010, respectively. A new Exposure Draft on the impairment of financial instruments is to be issued in the first half of 2012, as well as the new standard on hedge accounting.

The principal changes introduced by IFRS 9 in regard to financial assets can be summarised as follows:

  • financial assets may be classified in only two categories – at fair value or at amortised cost. The categories of loans and receivables, available-for-sale financial assets and financial assets held to maturity are therefore eliminated. Classification within the two categories is made on the basis of the entity’s business model and on the basis of the features of the cash flows generated by the assets themselves. Financial assets are measured at amortised cost if both the following requisites are met: the entity’s business model envisages that financial assets are held to collect their cash flows (thus, substantially, not to make trading profits) and the characteristics of the cash flows of the assets correspond only to payment of principal and interest. Otherwise, financial assets must be measured at fair value;
  • the accounting rules for embedded derivatives have been simplified: separate accounting for the embedded derivative and the “host” financial asset is no longer required;
  • all equity instruments – both listed and unlisted – must be measured at fair value. IAS 39 stated instead that if fair value could not be determined reliably, unlisted equity instruments had to be measured at cost;
  • the entity has the option of presenting in equity any change in the fair value of equity instruments not held for trading, while this option is forbidden for those held for trading. This designation is permitted at the time of initial recognition, may be adopted for a single financial instrument and is irrevocable. If this option is taken, the fair value changes of such instruments can never be reclassified from equity to the Income Statement (either in the event of impairment or in the event of sale). Dividends instead continue to be recognised in the Income Statement;
  • reclassifications between the two categories of financial assets are not allowed, except in rare cases where there is a change in the entity’s business model. In this case, the effects of the reclassification are applied prospectively;
  • the disclosures required in the notes has been adapted to the classification and measurement rules introduced by IFRS 9.

In regard to financial liabilities, the IASB has substantially confirmed the provisions of IAS 39, except for the requirements applicable to the fair value option. When the fair value option is adopted for financial liabilities, the change in fair value attributable to the change in the issuer’s credit risk must be recognised in the Statement of Comprehensive Income and not in the Income Statement.

This standard, which will come into force on January 1, 2015, has not been endorsed yet by the European Union. It is currently impossible to quantify the impact resulting from future application of this standard to the classification and measurement of financial assets. The changes affecting financial liabilities are not applicable to the Group.

Amendments to IAS 12 – Income Taxes – Defered Taxes: recovery of underlying asets

IAS 12 requires measurement of deferred taxes related to an asset or liability according to whether the book value of the asset is recovered through use or through sale. In the case of assets carried at fair value pursuant to IAS 40 – Investment Property, determining whether recovery is realised through use or sale might be difficult and subjective. These changes offer a practical solution to the problem, by allowing one to assume that investment property will be recovered entirely through sale. Consequently, SIC 21 – Income Taxes - Recovery of Revalued Non-Depreciable Assets is no longer applicable to investment property carried at fair value. The guidelines of SIC 21 that are still applicable have been incorporated in the amended version of IAS 12, and SIC 21 will consequently be abrogated. These amendments, which are expected to come into force effective July 1, 2012, have not yet been endorsed by the European Union and are not applicable to the Group.

Amendments to IFRS 1 – First-time Adoption of International Financial Reporting Standards – Severe Hyperinflation and Removal of fixed dates for first-time adopters

The amendments that have been introduced concern:

  • guidelines for preparing the financial statements in accordance with IFRSs after a period when application of IFRSs was suspended due to hyperinflation;
  • elimination of fixed dates upon first-time adoption of IFRSs. The entities that adopt IFRSs apply the requirements for the derecognition of financial assets and liabilities prospectively, i.e. they are no longer obligated to reconstruct transactions that occurred before transition date to IFRSs and that led to derecognition of financial assets and liabilities.

These amendments, came into force effective July 1, 2011, have not yet been endorsed by the European Union and are not applicable to the Group.

IFRS 11 – Joint Arrangements

The new standard, which replaces IAS 31 – Interests in Joint Ventures, distinguishes two categories of joint arrangements that are associated with different accounting treatment:

  • joint operations: these are agreements that give the parties of the agreement, which have joint control of the initiative, rights to the individual activity and obligations for the individual liabilities related to the agreement. In the case of joint operations, the assets, liabilities, costs and revenue of the agreement must be recognised on the basis of the applicable accounting standards;
  • joint ventures: a joint venture exists when the parties, which have joint control of the venture, do not have rights or obligations in relation to the individual assets or liabilities covered by the agreement, but only in relation to the net assets or net income (loss) of the venture. Joint ventures must be consolidated with the equity method, while IAS 31 allowed the option of choosing between proportional consolidation and consolidation according to the equity method.

This standard, which will come into force on January 1, 2013, has not been endorsed yet by the European Union. No impact on the consolidated financial statements is expected.

IFRS 12 – Disclosure of Interests in Other Entities

IFRS 12 includes – and expands on – all the requirements governing the disclosures that must be given in regard to subsidiaries, associates, joint arrangements and other equity investments (“structured entities”). Many of the disclosures required under IFRS 12 were previously included in IAS 27 – Consolidated and Separate Financial Statements, IAS 28 – Investments in Associates, and IAS 31 – Interests in Joint Ventures, while others are new.

This standard, which will come into force on January 1, 2013, has not been endorsed yet by the European Union. The impact of disclosure on the consolidated financial statements following future application of this standard is being analysed.

IFRS 13 – Fair va lue measurement 

IFRS 13 includes guidelines for determining fair value and required disclosures. The standard does not extend the use of fair value, but it provides rules for its determination and application when other principles allow or require it to be used.

This standard, which will come into force on January 1, 2013, has not been endorsed yet by the European Union. No impact on the consolidated financial statements is expected.

Amendments to IAS 1 – Presentation of Financial Statements – presentation of items of other comprehensive income

The principal amendments to IAS 1concern the new way to present items of other Comprehensive Income: the items presented in the Statement of Comprehensive Income will have to be grouped between those that may be recycled in future to the income statement and those for which this possibility is not envisaged.

The following are examples of reclassification to the Income Statement: translation exchange differences, fair value adjustment of cash flow hedge derivatives, fair value adjustment of available-for-sale equity investments. The actuarial gains / losses for defined benefit pension plans are an example of items not subject to reclassification to the Income Statement.

These amendments, which will come into force effective July 1, 2012, have not yet been endorsed by the European Union. Future application of these amendments will not have a material impact on the consolidated financial statements.

IAS 19 – Employee Benefits

The amendment of IAS 19 is focused on the procedures used to account for defined benefit plans, other long-term benefit plans and termination benefits. The principal changes from the current standard concern:

  • defined benefit plans: actuarial gains/losses (renamed “remeasurements”) must be immediately and fully recognised in the Statement of Comprehensive Income. The option that allowed not recognising actuarial gains/losses if they fell within a certain “corridor” and deferring them instead if they did they did fall outside this “corridor” (“corridor approach”);
  • other long-term benefits (e.g. jubilee awards): actuarial gains/losses (renamed “remeasurements”) will have to be recognised in the Comprehensive Statement of Income. Immediate recognition in the income statement will no longer be allowed;
  • elimination of the “expected return on plan assets” and “interest expense,” which will be replaced by a new quantity called “net interest,” calculated by applying the discount rate now used only for the gross liability to the net liability (i.e. the gross liability net of plan assets);
  • request for additional disclosures to be included in the explanatory notes to the financial statements for an improved illustration of the risks stemming from defined benefit plans;
  • termination benefits: according to the new standard, the factor that determines the timing for recognition in the financial statements is the fact that the entity may not withdraw the offered benefit, i.e. it is irrevocable. Accordingly, termination benefits can essentially be of two types:
    • benefits connected with a broader restructuring plan, where the entity may not withdraw the offer and the employee has no alternative to accepting it; in this case, the offer is considered irrevocable when the layoff plan is notified to the affected persons;
    • individual benefits that the business may theoretically withdraw at its discretion until acceptance by the employee: in this case, the offer becomes irrevocable when the employee accepts it.

This standard, which will come into force on January 1, 2013, has not been endorsed yet by the European Union. In regard to the foreseeable impact on the consolidated financial statements, it should be noted that elimination of the corridor approach will have no impact since the Group already does not use this option. The other impacts are being analysed.

IFRS 10 – Consolidated Financial Statements

The new standard replaces IAS 27 – Consolidated and Separate Financial Statements – for the portion relating to the consolidated financial statements – and SIC 12 – Consolidation – Special Purpose Entities. IAS 27 – renamed “Separate Financial Statements” –contains only the principles and guidelines to be used in preparing the separate financial statements.

The new version of IFRS 10 defines just one control model that applies to all entities and represents the key factor in determining whether an entity has to be consolidated. Instead, the accounting treatment and consolidation procedures have not changed from what is currently envisaged in IAS 27.

The new control model introduces a greater degree of subjectivity and will demand that management exercise a higher standard of judgement to determine whether an entity is controlled and thus has to be consolidated. This new standard also explicitly envisages the possibility of controlling an entity even in the absence of a majority of votes (de facto control), a concept that was not explicitly stated in IAS 27.

This standard, which will come into force on January 1, 2013, has not been endorsed yet by the European Union. The impact on the scope of consolidation resulting from introduction of the new standard on firsttime application is currently being analysed.

IAS 27 – Separate Financial Statements

Following the introduction of the new IFRS 10 and 12, what remains of IAS 27 is limited to the accounting of subsidiaries, joint ventures and associates in the separate financial statements. These amendments, which will come into force effective January 1, 2013, have not yet been endorsed by the European Union. Future application of these amendments will not impact the consolidated financial statements.

IAS 28 – Investments in Associates and Joint Ventures

Following the introduction of the new IFRS 10 and 12, IAS 28 has been renamed “Investments in Associates and Joint Ventures” and describes application of the equity method for equity investments in joint ventures, in addition to associates. These amendments, which will come into force effective January 1, 2013, have not yet been endorsed by the European Union. Future application of these amendments will not impact the consolidated financial statements.

Amendments to IFRS 7 – Financial Instruments: Disclosures – Offseting Financial Assets and Liabilities

These amendments introduce the obligation of providing full disclosures in the notes of financial assets and liabilities offset on the basis of a statutory right to offsetting (e.g. net and gross amounts, guarantees granted and held). These amendments, which will come into force effective January 1, 2013, have not yet been endorsed by the European Union. It is not expected that future application of this interpretation will have any impact on the Group financial statements.

Amendments to IFRS 7 – Financial Instruments: Disclosures – First-time Application of IFRS 9

These amendments introduce the obligation of providing additional quantitative information upon transition to IFRS 9 to clarify the effects of first-time adoption of IFRS 9 on the classification and measurement of financial instruments. These amendments, which will come into force effective January 1, 2015, have not yet been endorsed by the European Union. The impact of future application of these amendments cannot be quantified at this time.

Amendments to IFRS 32 – Financial Instruments: Presentation – Offseting Financial Assets and Liabilities

These amendments better clarify the significance of the requirements for offsetting financial assets and liabilities, already present in this standard, i.e.

  • the significance of currently enjoying the statutory right to offsetting financial assets and liabilities;
  • the fact that in certain cases, realisation of the asset at the same time as extinguishment of the liability may be considered de facto extinguishment of a net amount.

These amendments, which will come into force effective January 1, 2014, have not yet been endorsed by the European Union. It is not expected that future application of this interpretation will have any impact on the Group financial statements.