ECONOMICS - ACCOUNTING

Economics - Accounting

Economics - Accounting

TASK I: GUIDANCE MANUAL

What are IFRS?

The "International Financial Reporting Standards" (IFRS) are a set of international reporting rules, ratified by the European Commission, that Companies with securities listed on regulated markets of Member States of the European Union are required to adopt for their consolidated financial statements starting in 2005. With a view to facilitating a comparison between the results for 2005, Eni has adjusted the interim and final reports for 2004 to the IFRS principles. The presentation on the effect of the IFRS adoption is available on the Investor Relations section.

Who is responsible for developing IFRS?

IASCF and is the body responsible for developing International Financial Reporting Standards (IFRS), in cooperation with multiple national accounting standards setters worldwide. It was founded in 2001 by the IASCF and is headquartered in London. The IASB followed the International Accounting Standards Committee (IASC), created in 1973 and issuer of the International Accounting Standards (IAS), predecessors to IFRS.

How are standards developed?

Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and SICs. The IASB has continued to develop standards calling the new standards IFRS.

A major difference between US GAAP and IFRS is the fact that three fundamentally different concepts of capital and capital maintenance are authorized in IFRS while US GAAP only authorize two capital and capital maintenance concepts during low inflation and deflation: (1) physical capital maintenance and (2) financial capital maintenance in nominal monetary units (traditional Historical Cost Accounting) as stated in Par 45 to 48 in the FASB Conceptual Satement Nº 5. US GAAP does not recognize the third concept of capital and capital maintenance during low inflation and deflation, namely, financial capital maintenance in units of constant purchasing power as authorized in IFRS in the Framework, Par 104 (a) in 1989.

What do we mean by the International Regulatory Framework?

All EU companies listed on a regulated market will be required to prepare their consolidated accounts in accordance with endorsed International Accounting Standards from 2005 onwards.

The IASB - International Accounting Standards Board issued its framework for the Preparation and Presentation of Financial Statements in 1989. This is referred to as its conceptual framework. The framework sets out the concepts that shape the preparation and presentation of financial statements for external users. The framework does not have the status of an accounting standard as also is the case with the ASB's Statement of Principles. The IASB framework assists the IASB:

“In the development of future International Accounting Standards and in its review of existing International Accounting Standards; and

In promoting the harmonisation of regulations, accounting standards and procedures relating presentation of financial statements by providing a basis for reducing the number of alternative ...