In an attempt to reduce uncertainties and negative reactions from investors, the Italian financial regulators (ISVAP, the Bank of Italy, and CONSOB for the financial services industry) have issued a joint recommendation on the information to be provided in financial statements.
Because of the current financial crisis, the regulators have stated that, although the application of the IAS/IFRS is supposed to assure an adequate level of disclosure, it will be necessary for members of the board of directors and any supervisory boards of companies to ensure that careful consideration is given to the information supplied in financial statements.
The joint recommendation issued by the regulators does not introduce any further disclosure obligations than those already set out by IAS and IFRS. However, the regulators identify those areas of financial reports that will be more affected by the current crisis, and on which the market will thus require more information. They clarify further how the IAS and IFRS should be interpreted in the following areas:
- the application of the principle of business continuity and the use of indicators and parameters;
- the description of the systems for measuring and managing financial risks, as well as the level of exposure to such risks;
- the verification of the reductions due to long lasting losses of asset value; as well as
- uncertainties as to the use of appraisals.
The joint recommendation is not only addressed to regulated entities, but to any issuer of securities or other financial instruments.