Machine Translated by Google NATIONAL COUNCIL OF DOCTOR COMMERCIALISTS AND ACCOUNTING EXPERTS THE REPORT ON OPERATIONS ART. 2428 CIVIL CODE THE MANAGEMENT REPORT ON THE FINANCIAL STATEMENTS AT THE LIGHT OF THE NEWS INTRODUCED BY DLGS 32/2007 ROME, 14 JANUARY 2009 Machine Translated by Google INDEX 1. Introduction ............................................... .............................................. 3 2. Normative references and scope of application .......................................... ..... 6 3. General considerations on the new information ........................................... ... 9 4. Financial indicators ............................................. ............................. 11 5. "Non-financial" indicators .......................................... ........................ 12 6. Description of the main risks and uncertainties ......................................... .. 13 7. Information relating to the environment and personnel ........................................ . 14 Annex I - Financial indicators ............................................ ................... 16 Annex II - Information relating to risks and uncertainties ............................... 26 Uncertainties and risks ............................................... .................................... 26 Uncertainties and financial risks .............................................. ......................... 28 Annex III - Information relating to the environment and personnel ............................ 31 Accounting principles and control and auditing systems Managing Director Luciano Berzè Commission for accounting standards and principles Environmental balance and sustainability study group president Coordinator Gianfranco Capodaglio Chiara Mio Components Components Guglielmo Antonacci Roberto Campidori Pier Giorgio Bedogni Basilio Aldo D'ascoli Luigi Borrè Uberto Noro Ubaldo Cacciamani Paolo Palombelli Ciro Di Carluccio Elisa Rita Ferrari Raffaele River CNDCEC experts Albert Lang Matteo Pozzoli Massimo Levino Elisa Sartori Raffaele Mazzeo Franco Zanovello 2 Machine Translated by Google 1. Introduction Italian joint-stock companies are required to follow for the first time in the 2008 financial statements and its annexes the indications provided for by Legislative Decree 32/2007 on "Implementation of Directive 2003/51 / EC amending Directives 78/660, 83/349, 86/635 and 91/674 relating to the annual accounts and consolidated accounts of certain types of companies, banks and other institutions financial and insurance companies ". With this decree, the national legislator implemented the mandatory content of Directive 51/2003 / EC, known as the "accounting modernization directive" 1, affecting on the preparation of the consolidated financial statements, management report and report by auditing of the companies concerned. The National Council of Chartered Accountants and Accounting Experts (CNDCEC), with the technical support of the "Commission for accounting standards and principles", intends make available to interested parties an operational vademecum for the fulfillment of the new disclosure obligations required by the legislator with specific reference to the preparation of the management report to be attached to the financial statements2 . It should be noted immediately that the information required by the new provisions contained in the aforementioned Legislative Decree 32/2007 must, in any case, be provided only if the conditions envisaged by the regulatory provisions occur, so much so that the law requires that the information contained in the report must be “[…] consistent with the size and complexity of the company's business. ". In accordance with this indication, the CNDCEC deemed it appropriate with reference to the financial disclosure define a "modular" information system, on the basis of which larger companies - which have a proportionately higher economic significance - must provide more information on this to company activity, compared to the amount owed by smaller companies. In this perspective, the document identifies a first level of information which, yes believes, all companies must indicate in order to be able to fulfill the disclosure obligations of the decree in question (hereinafter "mandatory") and a second level of information 1 The National Council of Chartered Accountants and Accounting Experts has already expressed its opinion to the Ministry of Economy and Finance on the proposal to complete the transposition of Directive 65/2001 / EC (better known as the "fair value directive") and of the accounting modernization directive. To consult the content of the observations, see: http://www.cndcec.it/PORTAL/Documenti/3024_elkqxnvfvn.pdf . 2 The Research Institute of Chartered Accountants and Accounting Experts has published a study document on the subject of the "new" report on operations concerning the doctrinal and professional guidelines on the subject. See: http://www.irdcec.it/node/338 . 3 Machine Translated by Google considered mandatory only for larger companies and optional for smaller companies. The quantitative parameters identified by the Community legislator to identify the large ones companies have been deemed, for our purposes, adequate for the purpose of this differentiation. In in line with what has been said, the second level of information provided in the document results mandatory only for companies that at the balance sheet date exceed the numerical limits of two of the following three criteria in the first financial year or, subsequently, for two consecutive financial years: - total assets in the balance sheet: 43,000,000 euros; - revenues from sales and services: 50,000,000 euros; 3 - number of employees employed on average during the year: 250 . The following table summarizes the approach adopted to define the information request contained in the document. Small and Medium Big business Businesses 1st level of information mandatory mandatory requests 2nd level of information optional mandatory requests The indications given in this document take into account one situation of "normal" business performance. The judgment on adequacy of the information contained in the report on operations - which ultimately belongs to to the budget editor - must always take into account the individual circumstances, the environmental context in which the company operates as well as its recent history; in 3 The quantitative parameters concerning medium-sized enterprises have been identified by the community legislator in order to provide for certain simplifications of an administrative-accounting nature (Directive 78/660 / EEC, art. 27); up to now, the national legislator has not made use of this option. The reference to these parameters by the document must be understood only as a quantitative indicator. It should also be noted that it was deemed appropriate to standardize the terminology of the Community provisions in the text to identify medium-sized enterprises with the terminology already adopted by the legislator to identify the companies which are given the opportunity to draw up the financial statements in abbreviated form (see note 4). 4 Machine Translated by Google special cases, there could be, for example, a small business with problems such as to require additional information to that proposed by document, just as there could be a large company that does not need to provide in part (if not entirely) the indications contained in the 2nd level of requests informative. 5 Machine Translated by Google 2. Normative references and scope of application The community legislator has decided to "modernize" the economic information financial through the issuing of a series of measures aimed at modifying specific aspects included in the accounting directives. The following table shows the text of Article 2428, as amended by Legislative Decree 32/2007, highlighting the changes made. Art. 2428. (Report on operations). The financial statements must be accompanied by a report by the directors containing a faithful, balanced and exhaustive analysis of the situation of the company and of the performance and results of operations, as a whole and in the various sectors in which it has operated, including through subsidiaries, with particular regard to costs, revenues and investments, as well as a description of the main risks and uncertainties to which the company is exposed. The analysis referred to in the first paragraph is consistent with the size and complexity of the company's business and contains, to the extent necessary for an understanding of the company's situation and management performance and results, the financial result indicators and, where applicable, non-financial information relevant to the specific activity of the company, including information relating to the environment and personnel. The analysis it contains, where appropriate, references to the amounts reported in the financial statements and clarifications additional on them. ... omitted ". All joint stock companies - regardless of whether they prepare their financial statements in compliance with civil law or international accounting standards (IAS / IFRS) - are 4 required to prepare the management report on the basis of the provisions of Article 2428 . Only companies that do not issue securities traded on regulated and non-regulated markets they exceed two of the parameters provided for by art. 2435-bis, paragraph 1, recently revised by means of Legislative Decree 173/20085 , they are exempt from drawing up the management report, if 4 It is noted that the IASB has already issued the Discussion Paper "Management Discussion and Analysis" to date and plans to issue the subsequent Exposure Draft "Management Commentary" to define the drafting of a document that should replace the financial statements of the companies which apply the International Accounting Standards to the Management Report. See: IASB, IASB Update, July 2008. 5 Based on the aforementioned implementing decree of Directive 46/2006 / EC, the companies that have this right are those that, in the first financial statements or subsequently for two consecutive financial years, have not exceeded two of the following limits: - total assets in the balance sheet: € 4,400,000; - revenues from sales and services: € 8,800,000; 6 Machine Translated by Google provide in the explanatory note the information required by numbers 3 and 4 of article 24286 . The decree in question applies to financial statements relating to financial years starting from a date subsequent to that of its entry into force, coinciding with November 21, 2008. This means that for the purposes of applying the simplified information, having to count the exceeding of these quantitative parameters starting from that date, the new ones limits introduced with Legislative Decree 173/2008 will produce their effects for companies that close their financial years after 21 November 20087 on the preparation of the economic-financial information - as well as on the discipline of the statutory audit - starting from the financial statements of the financial 8 years that close on December 31, 2009 . Based on the provisions of art. 5 of Legislative Decree 32/2007 the new provisions apply "To the financial statements relating to the financial years starting from the date subsequent to that of its entry into force ". It can be deduced that for companies that make the financial year coincide with the calendar year financial statements starting from the date following that of entry into force of the decree refer to the 2008 financial year. During the first application of the provisions in question it is considered that, in silence regulatory and considered the innovative content of some information requests, not the preparation of comparative information must be considered mandatory concerning the 2007 financial year. Finally, it should be noted that as regards the regulatory aspects, the joint stock companies that are subject to CONSOB supervision must produce the additional information documentation required by the Authority in order to protect the public savings, as well as other entities operating under the supervision of the - employees employed on average during the year: 50 units. 6 The third paragraph of Article 2428 provides that: "The report must in any case show: [...] 3) the number and par value of both treasury shares and shares or quotas of parent companies owned by the company, also through trust company or through a third party, with an indication of the corresponding share of capital; 4) the number and nominal value of both treasury shares and shares or quotas of parent companies purchased or sold by the company, during the year, also through a trust company or an intermediary, with an indication of the corresponding part of capital, of the considerations and of the reasons for the purchases and disposals; [...] ". that is, for companies for which the financial year coincides with the calendar year, with the financial statements ending on 31 December 2008 The company Alfa Spa whose financial year ends on 31 December 2008, wants to take advantage of the simplifications granted by 2435-bis in order not to draw up the management report. Alfa Spa exceeded 7 the “old” limits of 2435-bis on the closing date (31 December 2008) but not the “new” limits introduced with Legislative 8 Decree 173/2008. The company cannot prepare the 2008 financial statements in a simplified form; it may, if anything, use these simplifications starting from the 2009 financial statements, provided that even at that date at least two of the three quantitative parameters have not been exceeded. 7 Machine Translated by Google 9 Bank of Italy and ISVAP must follow the specific indications on the matter . 9 For this purpose, with specific reference to listed companies, see: CONSOB, CONSOB Communication No. DEM / 6064293 of 28.07.2006, CESR, CESR / 05-178b, CESR Recommendation on alternative performance indicators, 2005. As regards supervised entities from the Bank of Italy and ISVAP, see respectively: Bank of Italy, Circular 262/2005 - Bank financial statements: compilation formats and rules, and Provision of February 14, 2006 Instructions for the preparation of financial statements of financial intermediaries registered in the List special, of electronic money institutes (IMEL), asset management companies (SGR) and securities brokerage companies (SIM); and, with reference to insurance companies, Legislative Decree 209/2005, Code of private insurance. 8 Machine Translated by Google 3. General considerations on the new information The report on operations is a document addressed to external users, essentially aimed at completing and integrating the financial statement information with the aim of arrive at a correct reading of the company situation. The purely external relevance of the information provided implies and suggests not to equate the relationship with the internal management documents of reporting directional, going beyond the limit of corporate confidentiality. The information requests are not aimed, essentially, at disclosing the technical modalities and economic with which the resources are managed, but must allow the knowledge of situation of the company and the trend of the economic result, with particular regard to costs, revenues and investments, i.e. all elements normally contained in the financial statements and found in the general accounting 10. With specific reference to the rationale of the legislative innovations, the intention of the legislator consists, in fact, in providing a better reading through the report of the company situation, giving prominence, where deemed necessary, also to non-data inferable from the general accounting. It is crucial, then, for the purposes of a correct interpretation of the norm, to observe that the Community legislator requires to report in the circumstances previously examine “financial indicators” and, if applicable, “non financial indicators”. The Italian version of the EU provision, translating the term "financial" into “Financial” has, in reality, misled the original meaning of the information requests. In essence, therefore, the "financial indicators" are the indicators that can be extrapolated from general accounting, as well as the "non financial indicators" are the indicators that cannot be deduced from the general accounting. In summary, therefore, the legislator requires to make explicit indicators whose source is represented by the general accounts (i.e. the financial statements) and, if applicable, from indicators originating from information sources unrelated to the financial statements. In addition, it should be emphasized that the information being commented must be provided "to the extent necessary for understanding the situation of the company 10 In this regard, it should be noted that the same Legislative Decree 32/2007, by introducing the new paragraph 2 of art. 2409-ter, requested the persons in charge of the accounting control to express their professional opinion in an "audit report", the format of which is standardized and which provides, among other certifications, to provide "an opinion on the consistency of the management report with the financial statements "(Legislative Decree 32/2007, art.2, point 1, letter e). It is also noted that, with reference to the "main risks and uncertainties", some relevant information to be included in the explanatory notes is already prescribed by the accounting standard OIC 19, the provisions for risks and charges, the employee severance indemnity, the debts. 9 Machine Translated by Google and the performance and results of operations ". In case, then, the information reported in the financial statements are able to provide correct economic information financial, the company is not required to provide further information. The text of the law requires the reporting of financial indicators and, only "where appropriate", those non-financial. This implies that the reference to non-financial indicators must be necessarily (and not optionally) implemented only in situations in which neither the financial statements nor the financial indicators are capable of expressing significantly and with clarity of the situation of the company and the trend of the income result. Again, it is essential to note that the legislator with the term "indicator" wanted to identify any indicative reference useful for the information purposes mentioned above. In this perspective, the indicator can be represented by the identification of a aggregate considered particularly significant, a time series, a margin, a index (or quotient) as well as other information elements deemed useful. A "synthetic" indicator, if necessary, can also be supplemented by a specific explanation11. Finally, it is suggested to illustrate - as foreseen for the preparation of the financial statements - the only ones information that is considered significant and relevant for the purposes of a correct and comprehensive interpretation of the situation of the company, so as not to excessively weigh down and make the financial statement information less readable overall12. In this regard, it must not be forgotten that the Community legislator is intervening on the economic-financial communication of smaller companies identifying and, where appropriate, by eliminating information that provides less benefits than costs necessary for their retrieval. This reasonable philosophy must represent a principle of conduct useful for the application of all information requests of community matrix. 11 When the indicators used change from one financial year to the next, it is advisable to justify the choice made. 12 See: OIC, OIC 11, Financial statements - purposes and postulates. 10 Machine Translated by Google 4. Financial indicators The art. 2428 of the civil code provides that the financial statements be accompanied by a report by the directors containing an analysis of the company's performance; the new regulatory provision specifies that said analysis "is consistent with the size and complexity of the company's business and contains, to the extent necessary for understanding the situation of the company and the performance and results of its management, the indicators of financial and, if applicable, non-financial results relevant to the specific activity of the company, ... " The term “financial indicators” is, for what has been said in paragraph 3, used in a better way as it includes the improper from the legislator and and believes that, indicatorscorrectly, that can be deduced from the general accounting, capable of illustrating the company situation in a more complete way. In this sense, with the exception of the first year in which the new provisions are applied, it is considered appropriate to present the indicators relating to at least two consecutive years, the one in progress and that of the previous year. Furthermore, only if deemed necessary for the purpose of a more general balance of disclosure, is It is possible to report some economic - income indicators, also by sector of activity / geographic sector; on the other hand, the capital and liquidity indicators are usually referred to the whole enterprise. Annex I analyzes the most frequently used result indicators below as part of the budget analysis. 11 Machine Translated by Google 5. "Non-financial" indicators By "non-financial indicators" we mean quantitative data, usually of a non-nature monetary, able to briefly explain the factors that influence the business situation. Therefore, if deemed necessary according to what has already been indicated at the beginning of the document, the non- financial indicators are identified according to the sector of membership of the company, having regard to the size and complexity of the business of the society. The art. 2428 provides for the use of "non-financial" indicators when they are necessary for understanding the situation of the company and the performance and results of its management, that is, if the "financial" indicators are not deemed adequate for the purpose, or, in any case, do not allow to achieve the result of an adequate one understanding. For example, a company that closed its financial statements with a positive economic result, having, however, lost part of the market with which it developed the most significant part of its turnover, without being able to replace it, cannot limit itself to commenting on ROE and ROI. since the aforementioned event will undoubtedly also produce effects on the income of the future exercises and can also be better represented in the current management report through the use of the indicator turnover by customer, turnover lost, market share, etc. In formulating the aforementioned indicators, i following aspects: - market positioning; - customer satisfaction; - efficiency of production factors and production processes; - innovation. These elements signal, sometimes in advance of the matrix indicators accounting, trends in economic and financial results, especially in a perspective long-term. It was not considered appropriate to produce examples of these indicators given their great abundance and heterogeneity in corporate doctrine. It will be the responsibility of the editor of the financial statements not only to assess the need for this information, but also to establish the best modality and explanatory form. 12 Machine Translated by Google 6. The description of the main risks and uncertainties The legislator requires, among other information, to provide “a description of the main ones risks and uncertainties to which the company is exposed ". Also in this case, subject to the exceptions that the budget editor will have to make in relation to the peculiarity of the company concerned, as well as in relation to other rules of law providing for the disclosure obligation, it is believed that the obligation concerns only the larger companies, except as specified below; in the companies of smaller dimensions, in the event that the memorandum accounts or the information provided in the note are able to appropriately express the risks and uncertainties of the company activity, it is believed that no further compulsory provision should be made information. It should be noted that, unlike what is envisaged for financial and non-financial indicators financial statements, the legislator requires, with reference to the main risks and uncertainties, a "description", ie an illustration that can be proposed in a discursive form. In general, risks that have an impact must be included and described relevant from an information point of view and a high probability of occurrence; additional risks can be described if their inclusion provides useful information to the reader of the balance. Only any specific risks run by the company should be analyzed, different from all those phenomena connected with its corporate nature: in other words, not the risks that all companies run as such, or companies in that particular sector, must be described13. Annex II examines some procedures that can serve as examples in the analysis of any specific risks: in particular, in the second, the risks associated with financial instruments will be examined. 13 It should be noted that these obligations can also be understood as an opportunity to increase transparency and visibility towards stakeholders and in particular banking and financial institutions; in fact, the changes introduced some time ago in the internal mechanisms of banks for access to credit following Basel II., attribute to the variable risk a fundamental importance for the purposes of the qualitative and quantitative parameters for determining the bank rating. 13 Machine Translated by Google 7. Information relating to the environment and personnel The community legislator, who with the Green Paper already promoted environmental reporting in 2001, further intended to urge Member States to adapt national regulatory frameworks to make environmental reporting mandatory in the financial statements and in the management report in a perspective of complementarity of the environmental information with the economic-financial information. In this regard, par. 4.2 of Recommendation 2001/453 / EC provides that: “Information on aspects environmental issues should be made public to the extent that they are relevant to the results financial situation or the financial situation of the company. The information to be disclosed must be included, depending on their nature, in the annual and consolidated management reports or in the annex to the annual and consolidated accounts. " 14. Therefore, it is clear that the environmental and personnel information of corporate economic- financial communication must not be understood as an objective in itself, but as one of the many and possible analyzes that may be necessary for the purpose of understanding the performance of the company. By analogy, given the importance that Corporate Social Responsibility (CSR) assumes (and will increasingly assume) at a European level, the issues relating to sustainability acquire a dignity that goes beyond accounting statements: for this, social responsibility must materialize at least in the indication of some information relating to the environment and personnel. The CNDCEC believes - as also illustrated in the previous chapters - that there is one hierarchy in the disclosure to be provided in the management report and that must be use non-financial indicators only if these are really necessary to understand the situation of the company and the performance of the operating result, or if in the absence of such non-financial indicators the financial statements are not transparent and / or truthful and, therefore, misleading for its users. However, since the legislator wished to identify, among all, the “relevant information to the environment and personnel ”, the CNDCEC believes that this specific identification must be understood with a view to strengthening the social role of the company and, therefore, believes that compulsorily - and, therefore, regardless of the relevance of the 14 See: Commission of the European Communities, Recommendation 2001/453 / EC Environmental information in the accounts annual reports and in company management reports. 14 Machine Translated by Google economic effects produced on operations - should be provided in the management report, if related events have occurred, the information set out in Annex III. This information is divided into "mandatory" and "optional": - the mandatory information must be reported, in cases where the underlying events occur, by all companies, regardless of their dimension; - the optional information can be considered important and the CNDCEC hopes that many companies will provide such information, as they disclose one to third parties pro-active social and environmental policy and a positive CSR attitude: It should also be noted that in the optional information they could be appropriately including information on the sustainability strategy and related policies to the environment and personnel, as indicated in the aforementioned Recommendation 2001/453/EC. 15 Machine Translated by Google Annex I - Financial indicators * 1st LEVEL OF INFORMATION REQUESTS - NECESSARY DATA Analysis of the income situation Non-large companies are required to supply where the conditions examined in the body of the text, the indicators that can be deduced from the general accounting that are able to enrich the information already contained in the balance. In this context, it appears necessary, for example, to insert some historical series concerning the main economic aggregates, such as turnover (Item A1) “Revenues from sales "of the income statement) or the value of production (macro-class A" Value of production "of the income statement) or the Result before taxes (A-B + -C + -D + -E) at least for the last two financial years. The analysis of the development of these indicators highlights the trend of the main vehicles of income production of the company. It could be useful, if the company deems it appropriate, to insert the series of economic aggregates mentioned above for a period of time referring to the last 3 or 5 financial years, as in the table below. Exercise (t-4) Exercise (t-3) Exercise (t-2) Exercise (t-1) Exercise (t) Revenue (Production value o Result before the taxes) At the same time, it may be appropriate to indicate, always reporting the results of the last two years, some partial results considered significant. To proceed with the construction of the partial results and related indices, it is necessary reclassify the statutory income statement according to other structures suitable for the analysis of * It should be noted that the financial indicators illustrated in this annex can also be calculated by means of an electronic support available at the address: http://www.cndcec.it/PORTAL/home/jsp/cndc.jsp?cndct=0000003676&cndcp=0000000217 . 16 Machine Translated by Google balance. In order to suggest a valid and easily obtainable procedure, we refer to the balance sheet and income statement formats drawn up according to the functional criterion or managerial relevance 15. In the “reclassified” income statement, the criterion of managerial relevance identifies the following management areas, which can be inferred from the financial statements envisaged by the Civil Code: - the operating area, inherent to the typical and characteristic activity of the company, includes the values relating to the implementation and sale of production; - the ancillary area includes the positive and negative income components relating to an activity, if any, collateral to the operational one (for example: in a commercial enterprise, the management of real estate investments); - the financial area, concerning the management of financial investments and debts of financing, includes financial income and charges. It should be noted, however, that in the table below the financial charges on the debts of loan (item C 17 of the income statement) are shown separately from the other income components of the financial area 16. - the extraordinary area includes income and expenses not related to management ordinary company; - the tax area includes taxes for the year. Therefore, the income statement reclassified according to the criterion of operational relevance presents the following scheme 17: Macro-classes or items in the income statement Aggregates civil law Revenue from sales (Rv) A1 Internal production (Pi) A2 + A3 + A4 VALUE OF OPERATIONAL PRODUCTION (VP) A (net of A5) Operational external costs (C-external) B6 + B7 * + B8 + B11 VALUE ADDED (VA) A – (B6 + B7* + B8 + B11) Personnel costs (Cp) B9 15 For the instructions that allow the "transition" from the statutory to the "functional" schemes, please refer to the document National Council of Chartered Accountants, The corporate information system in the light of Basel 2 and the new company law, March 2004. See: http: //www.cndc.it/CMS/Documenti/761_blmfteztfm.pdf . 16 The financial area is exposed gross of financial income and net of financial charges, since in this way it is It is possible to show the gross operating result independently of the financing choices of the company. 17 For non-large companies, the reclassification scheme could only constitute a logical process for analyzing the company's income situation more correctly. It is deemed unnecessary to report the scheme in the management report. 17 Machine Translated by Google GROSS OPERATING MARGIN (EBITDA) [A – (B6 + B7 + B8 + B9 + B11)] Depreciation and provisions (Am and Ac) B10 + B12 + B13 (A1 + A2 + A3 + A4) – (B6 + B7 + B8 + B9 + B10 OPERATING INCOME + B11 + B12 + B13) Result of the accessory area A5 – B14 Result of the financial area (net of financial charges) C (net of C17) + D NORMALIZED EBIT A- B +/- C (net of C17) +/- D Result of the extraordinary area E20 – E21 FULL EBIT A - B +/- C (net of C17) +/- D +/- E Financial charges (Of) C17 GROSS RESULT (LR) A – B +/- C +/- D +/- E Income taxes 22 NET PROFIT (RN) 23 * Item B7, where deemed relevant, should be interpreted in relation to the nature of the services used in the relevant items; for example, if the company had included in the item in question costs representing amounts paid to collaborators and / or consultants by virtue of the services provided, it would seem appropriate to allocate this portion to the item relating to "personnel costs". The diagram above allows to highlight the area results, suitable for be related to the relevant invested capital. On this basis they can be calculated the following intermediate income margins: Macro-classes or items in the income statement Aggregates civil law [(A1 + A2 + A3 + A4) – (B6 + B7 + B8 + B9 + GROSS OPERATING MARGIN (EBITDA) B11)] (A1 + A2 + A3 + A4) – (B6 + B7 + B8 + B9 + B10 OPERATING INCOME + B11 + B12 + B13) NORMALIZED EBIT A- B +/- C (net of C17) +/- D FULL EBIT A - B +/- C (net of C17) +/- D +/- E Financial situation analysis Where the company is adequately capitalized and demonstrates that it is capable of maintaining a financial balance in the medium to long term does not seem necessary provide further information on the financial situation of the company. In this perspective, it must be considered that there are generally no indicators or values 18 Machine Translated by Google accepted that they are able to absolutely ascertain whether the company results undercapitalized; each case must be studied separately in relation to some characteristic factors, such as: the operating sector, the size of the company, the creditworthiness, the possibilities of intervention of the shareholders as well as the history and experience of the company structure. If, based on this analysis, the company proves that it has no coverage problems of the commitments made, it may not be necessary to express further indicators concerning the financial situation. Solidity indicators The analysis of equity solidity has, as mentioned, the purpose of studying the capacity of the company to maintain financial balance in the medium to long term. Said capacity it depends on two kinds of reasons: - the method of financing medium / long-term loans; - the composition of the sources of funding; With reference to the first aspect, on the assumption that the recovery time of the jobs must be related "logically" to the recovery time of the sources, the indicators aimed at studying this correlation are: FINANCING INDICATORS OF FIXED ASSETS Indicator Macro-classes or classes of the statutory balance sheet Primary structure margin Own funds Apass - (Batt - BIII1 + CII1) - Fixed assets Means Primary structure quotient Own / Active Apass / (Batt - BIII1 + CII1) fixed (Own funds + Liabilities Secondary structure margin consolidate) Apass + (B + C +D)1 – (Batt - BIII1 + CII1) - Fixed assets (Own funds + Liabilities [Apass + (B + C +D)1]/(Batt - BIII1 + CII1) Secondary structure quotient consolidate) / Fixed assets Asset assets BIII1 includes that part of the receivables which, entered among fixed assets, is destined to be collected within 12 months 19 Machine Translated by Google CII1 includes that part of the receivables which, entered in current assets, is destined to be collected beyond 12 months Balance sheet liabilities (B + C + D) 1 represents the company's liabilities destined to be settled beyond 12 months from the closing date of the financial year. It is specified that the aggregates "Fixed assets" and "Consolidated liabilities" should include, if significant, the portion of medium-long term accruals and deferrals With reference to the second aspect, concerning the composition of the sources of financing, the following optional indicators are suggested, among others: INDEXES ON THE STRUCTURE OF FUNDING Macroclasses or classes of the state Indicator statutory patrimonial (Consolidated liabilities + Debt ratio Current liabilities) / Means total Own [Bpass + Cpass + Dpass + Epass]/Apass Debt ratio Financing Liabilities / financial Own funds D1pass/Apass D1 includes the amounts obtained by way of financing 20 Machine Translated by Google 2nd LEVEL OF INFORMATION REQUESTS - OPTIONAL DATA Analysis of the income situation Large companies should disclose the income statement format reclassified according to the criterion of managerial relevance. In addition to the indications provided, it is believed that the company should indicate the ROI and ROS with reference to each relevant sector of intervention. The criterion for dividing the income statement into areas, insofar as it can be deduced from the schemes of the civil code, can also be extended to the uses and sources of the company's capital, in order to build appropriate and correct profitability indicators. Assuming that the classification of the "zones" of the balance sheet can be carried out correctly only having a thorough knowledge of the investments e sources of funding, the balance sheet scheme for "Functional areas": Aggregate Macroclass Aggregate Macroclass of the state of the state patrimonial patrimonial civil law civil law OPERATING INVESTED CAPITAL (CIO) B1 + C1 + D1 OWN MEANS (Mp) A EXTRA-OPERATIONAL LOANS (I and o) A + B2 + C2 + FINANCING LIABILITIES (Pf) D1 + E2 D2 OPERATING LIABILITIES (Po) B + C+ D2 + E1 INVESTED CAPITAL (Cio + I and o) Active FINANCING CAPITAL (Mp + Pf + Po) Liabilities patrimonial patrimonial Asset assets B1 and C1 include the operational investments relating respectively to the structural dimension (recorded in fixed assets) and to the operating cycle of the company (recorded in current assets) B2 and C2 include the loans relating to the non-operating area destined to persist within the structure respectively for a multi-year period (recorded in fixed assets) and for a short period (recorded in current assets) D1 and D2 represent the accrued income and prepayments relating, respectively, to operational management and non-operational management 21 Machine Translated by Google Equity liabilities D1 includes the monetary amounts obtained as a loan D2 includes the "spontaneous" loans deriving from operating activities (for example, payables to suppliers for manufacturing or service companies) E1 and E2 represent accrued expenses and deferred income relating, respectively, to operational management and financial management It should be noted that own shares (especially those recorded among financial fixed assets) should, if significant, be deducted from own means. With reference to the “functional” income statement and balance sheet layouts, the profitability ratios most frequently used in business practice, are the following: PROFITABILITY RATIOS * Indicator Macro-classes, classes or items of the statutory financial statements Net ROE Net result / Means 23) profit (loss) for the year / Apass own Gross ROE Gross result / Means [A-B + -C + -D + -E (income statement classes)] / Apass own [(A1 + A2 + A3 + A4) – (B6 + B7 + B8 + B9 + B10 + B11 + B12 + B13) (classi ROI Result of the income statement] / operational / (CIO - [( (B1att + C1att + D1att) - (Bpass + Cpass + D2pass + E1pass)] Operating liabilities) [(A1 + A2 + A3 + A4) – (B6 + B7 + B8 + B9 + B10 + B11 + B12 + B13) (classi ROS Operating income/ of the income statement] / A1 (income statement class) Sales revenue * The symbology used is consistent with that adopted in the illustration of the state assets by "functional areas" Only if the company operates in several extremely heterogeneous sectors, and “has” the results of each sector (income, sales and average invested capital), the ROI and ROS could be referred to each sector. Financial situation analysis Large companies should illustrate the balance sheet layout financial. On the basis of said scheme, as previously highlighted, the financial indicators; these, instrumental to assess the financial situation 22 Machine Translated by Google of the company, they can analyze in addition to the solidity (previously examined) also the financial solvency (or liquidity). To verify the company's ability to meet its commitments, it is necessary to examine its financial strength. To this end, it is advisable to re-read the statutory balance sheet according to a "financial" logic 18. Below is the layout of the financial balance sheet: 19 FIXED ASSETS (Af) OWN MEANS (MP) Macroclasses o Macroclasses o Aggregate classes of the Aggregate classes of the state state patrimonial patrimonial civil law civil law Intangible assets WITH A Share capital AI Tangible fixed assets KIND OF Reserves A (net of AI) Financial fixed assets (BIII al netto at BIII1) + CII1 PASSIVITA' CONSOLIDATE (Pml) (B + C +D)1 CURRENT ASSETS (Ac) Warehouse CI + D1 Deferred liquidity A + BIII1 + CII CURRENT LIABILITIES (Pc) (B + C + D)2 + E (net of CII1) + CIII + D2 Immediate liquidity CIV INVESTED CAPITAL (Af + Ac) FINANCING CAPITAL (MP + Active Passive Pml + Pc) 18 The reclassification scheme could only constitute a logical process for non-large companies to more correctly analyze the financial soundness of the company. It is deemed unnecessary to report the scheme in the management report. 19 With reference to the reclassification techniques that make it possible to re-elaborate the statutory balance sheet in the financial balance sheet, please refer to the document: CNDC, The corporate information system, op. cit., chap. 4. 23 Machine Translated by Google patrimonial patrimonial Assets BIII1 includes that part of the receivables which, recorded among fixed assets, is destined to be collected within 12 months D1 represents the part of the macro class D referring to prepaid expenses. Deferrals are assumed to be short-term; should the medium / long-term deferrals be of a significant amount, it is suggested to allocate this part to the fixed assets among intangible fixed assets D2 represents the part of the macro class D referring to accrued income. Accruals are assumed to be short-term; should the medium / long-term accruals be of a significant amount, it is suggested to allocate this part to the fixed assets among the financial fixed assets CII1 includes that part of the receivables which, entered in the current assets, is destined to be collected beyond 12 months Balance sheet liabilities (B + C + D) 1 represents the company's liabilities destined to be settled beyond 12 months from the closing date of the financial year. (B + C + D) 2 includes the company's liabilities destined to be settled within 12 months from the closing date of the financial year E represents the macro class of accrued liabilities and deferred income. Accruals and deferrals are assumed to be short-term; should the medium / long-term accruals and deferrals be of a significant amount, it is suggested to allocate this part to the consolidated liabilities Solvency (or liquidity) indicators The liquidity analysis aims to study the ability of the company to maintain financial equilibrium in the short term, i.e. to cope with the expected short-term outflows (current liabilities) with the existing liquidity (immediate liquidity) and the expected revenues for the short term (deferred liquidity). Therefore, on the assumption that the recovery time of jobs must be “logically” correlated to the recovery time sources, the indicators to study this correlation are: * SOLVENCY INDICATORS Indicator Macro-classes or classes of the statutory balance sheet Active chain - Availability margin Liabilities (Aatt + Catt + BIII1- CII1 + Datt) - [(B + C + D) 2 pass + Epass] currents Active Quotient of chain / availability Liabilities (Aatt + Catt + BIII1- CII1 + Datt) / [(B + C + D) 2 pass + Epass] currents Treasury margin (Liquid assets [A + BIII1 + CII (al netto di CII1) + CIII + D2 + CIV]–[(B + C + D)2 pass + Epass] deferred + 24 Machine Translated by Google Immediate liquidity) - Liabilities currents (Liquid assets deferred + Immediate [A + BIII1 + CII (net of CII1) + CIII + D2 + CIV)] / [(B + C + D) 2 steps + Treasury quotient liquidity) Epass] / Liabilities currents * The symbology used is consistent with that adopted in the illustration of the state balance sheet for "financial" 25 Machine Translated by Google Annex II - Information relating to risks and uncertainties Uncertainties and risks Risk is typically defined as an event that can produce negative effects; it therefore indicates a measure of the possibility of suffering damage deriving from processes in current or future events. Risks can be divided into external and internal risks: • external risks are caused by events external to the company such as competition, the socio- economic and geo-political context, the legislative and regulatory context, natural events, etc. • internal risks are events dependent on endogenous factors, such as strategy company, the organizational and governance models and in general connected to the actions implemented by the company for the pursuit of its objectives. In the context of external and internal risks, it is possible to find further classifications useful for their identification. Further risk-related definitions relate to the concept of inherent risk and of residual risk: • the inherent risks are the hypothetical risks in the absence of any control activity e risk mitigation itself. It is therefore those risks that exist independently of the mitigating actions implemented; • Residual risks are the risks that remain with the company after the implementation of the mitigation actions. The identification of the information to be included in the management report takes place through a path that includes the following logical steps: 1) Understanding the context in which one operates: it is important to understand the environmental context, in order to identify the risks and uncertainties to which one is most exposed. The management of these risks must be consistent with the achievement of the own strategic objectives; 2) Identify the risks: after understanding the context, the company must identify inherent risks (or potential risks). There are numerous methodologies a support of this activity, but in general the identification of risks can take place starting from standard risk maps that constitute a reference point of 26 Machine Translated by Google departure. The identification of the context referred to in the previous point is important for identify, with respect to the starting list, if the company is exposed to one or more of such risks; 3) Assess the risks: the subsequent analysis must lead by the management of company, to the assessment of each individual risk in terms of impact and probability of occurrence (for example attributing the high-medium-low values), not considering, in this phase, the effect of any mitigation actions implemented. It may be useful to position, in a graph, the risks thus assessed as shown in the example below: High Medium Impact Bass Low Media high Chance Figure 1 - Risk positioning chart with respect to impact and probability of occurrence In general, the high risks must be reported in the report on operations impact and with a high probability of occurrence. The company can however evaluate the inclusion of further risks that may bring information benefits to the reader of the balance; 4) Identify the mitigation actions: although paragraph 1 of art. 2428 of the Italian Civil Code explicitly requests to insert the mitigation actions implemented by the company with with reference to the risks described, their indication, as mentioned, can represent an opportunity to make the information published more complete and exhaustive, while increasing their transparency and quality and reputation corporate. Mitigation actions are understood as management's inherent risk responses has identified and that can act on the probability of occurrence and / or on the impact. The mitigation action, counteracting the inherent risk, makes it possible to reduce the 27 Machine Translated by Google so-called residual risk. The more effective the mitigation action is, the more the residual risk is low. Risks should be listed in the report, broken down by category, with a brief description of the same and of the mitigation actions undertaken from society; management's assessment must emerge from the description of the risk it attributes to the risk both at an inherent and residual level without necessarily provide an objective indicator of the impact / probability of occurrence. Financial uncertainties and risks The information requested in the financial risk management report (letter 6-bis of Article 2428 of the Italian Civil Code) can be divided into two classes: - qualitative information, aimed at describing the objectives of the company management, the policies and criteria used to deal with financial risks; - quantitative information, aimed at providing information about the size the company's exposure to financial risks. The information quantitative must be provided only if those contained in the supplementary note they are considered insufficient. The information must be provided "in relation to the use by the company of financial instruments and if relevant for the evaluation of the equity and financial situation and the economic result for the year". The directors are essentially required to make an assessment of the degree of detail of the information to be provided based on both the quantity and the quality of the financial instruments used by the company, depending on the characteristics of operational management of the corporate object exercised. OIC 3, Information on financial instruments to be included in the explanatory notes e in the report on operations (articles 2427 - bis and 2428, paragraph 2, no. 6-bis of the civil the basic definitions of "price risk", "credit risk", "liquidity risk" and "risk of changes in financial flows". Compared to previous versions and without however changing their meaning and scope, the current IFRS 7 brings price risk and the risk of changes in cash flows back into the single category of market: - market risk is the risk that the fair value or the future cash flows of one 28 Machine Translated by Google financial instrument fluctuate following changes in market prices. The risk market includes three types of risk: currency risk, interest rate risk interest and other price risk; - credit risk is the risk that one of the parties to a financial instrument causes a financial loss to the other party by failing to fulfill an obligation; - liquidity risk is the risk that an entity will have difficulty in meeting obligations resulting from financial liabilities. With reference to qualitative information on risk management policies financial information relevant to fully defining it should have as its object20: - the degree of use of the financial instruments; - the structure and organization of the risk management functions; - the purpose and nature of the financial risk measurement and assessment systems; - hedging or financial risk mitigation strategies; - the processes put in place by the company to monitor the efficiency of these strategies; - the policies and criteria used by management to avoid excessive risk concentrations and obtain guarantees to mitigate it. With reference, however, to the quantitative aspects on the degree of exposure of the company to financial risks, in relation to the credit risk relating to each class of instruments financial statements must be provided: - information on the credit quality of financial assets; - the amount which, at the balance sheet date, represents the maximum exposure to credit risk, without taking into account any ancillary guarantees or other elements that improve credit quality; - where appropriate, a description of the ancillary guarantees must be provided obtained (e.g. pledges, mortgages, sureties, etc.) and other substantial instruments collateral obtained (e.g. channeling of payments by the debtor). In relation to liquidity risk, analyzes are presented on the contractual maturities relating to financial assets and liabilities classified in an appropriate number of bands 20 See: IASB, IFRS 7, Financial instruments: additional information, par. IG 15. 29 Machine Translated by Google deadlines 21. It is noted that, differently from what is required by OIC 3, IFRS 7, par. 39 (a), does not provide for the obligation to provide information on contractual deadlines financial assets, but only liabilities. If the company faces liquidity risk based on the expected maturity dates, that they can also be different from contractual ones, trying to match revenue and financial outflows for time-limits, it would be necessary to illustrate for each maturity expected both the financial liabilities and the financial assets involved. In the context of these analyzes need to be clarified whether the expected dates are based on estimates made by management company, illustrate how they were determined, and indicate the main reasons for the differences between the contractual deadlines and the expected deadlines 22. In relation to the risk of market, the company provides the relevant information in line with the data produced internally for risk management purposes. If the risk is significant, it is appropriate to illustrate a sensitivity analysis at the balance sheet date, thus showing the effects of possible changes on the income statement in relation to the change, reasonably possible, of one or more of the following components: - interest rate risk: the sensitivity analysis shows separately the effect of a change in interest rates on interest income and expense as well as on other related income components; - exchange rate risk: the sensitivity analysis on financial instruments denominated in foreign currencies can be provided for the main currencies in which the company is shown and indicates the effects on the income statement of a change in interest rates change; - price risk: with reference to this risk, relating for example to fluctuations the prices of wholesale goods, the prices of equity instruments or of financial instruments, the sensitivity analysis can be modulated by showing the effects on the income statement of a decrease, for example, in a stock market index or wholesale prices of goods. 21 See: IASB, IFRS 7, par. B11, Appendix B, an integral part of the Standard. 22 See: IASB, IFRS 7, para. IG 30. 30 Machine Translated by Google Annex III - Information relating to the environment and personnel Mandatory staff information: - deaths at work of personnel enrolled in the employee register, for which corporate responsibility has been definitively ascertained; - serious accidents at work which led to serious or very serious injuries to the personnel enrolled in the employee register for whom corporate responsibility has been definitively ascertained; - charges relating to occupational diseases on employees or former employees and causes of mobbing, for which the company has been declared definitively responsible, describing the nature and extent of such charges. Mandatory information on the environment - damage caused to the environment for which the company was found guilty in via definitive; - final sanctions or penalties inflicted on the company for crimes or environmental damage; - greenhouse gas emissions pursuant to law 316/2004 (mandatory for plants subject to the Emissions Trading Scheme (ETS) and optional for other companies). Optional information on personnel and the environment - initiatives aimed at transforming previous forms of "precarious" work into contracts for permanent job; - investments in personnel (safety) and related operating costs; - environmental investments and environmental costs (pursuant to the Recommendation 2001/453 / EC, i.e. investments and costs that improve the environmental impact, distinguishing them from those necessary to respect the parameters set by the law); - waste disposal and recycling policies, if relevant; - certifications (Sa 8000; Emas; Iso 14000; Dm Sas); - greenhouse gas emissions pursuant to law 316/2004 and any green certifications, if the company is not part of a sector for which this disclosure is mandatory. 31