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Ordinary, abbreviated and consolidated statutory financial statements

The financial statements represent the fundamental information document on company dynamics and it has relevance above all for purposes of external communication.

Precisely due to the different information available for each type of financial statement, Leanus allows you to filter the analyzes also by budget type.
For example, it is possible to select only the Consolidated, only the Ordinary or if both are present, it is possible to choose one of the two and so on.

The provisions of the Civil Code provide for different schemes:

  • the ordinary budget, governed by the provisions dictated by articles from 2423 to 2427-bis of the Civil Code, always accompanied, pursuant to art. 2428 of the civil code, from the management report;
  • the abbreviated financial statements, which is governed by article 2435-bis of the civil code;
  • the "mixed" budget, that is, a budget halfway between the ordinary and the abbreviated budget.

The ordinary budget

The "ordinary" financial statements are made up of three documents: two of the accounting type (Balance Sheet and Income Statement), one of the non-accounting type (the Explanatory Note). A fourth non-accounting document (the Management Report) must also be attached to the financial statements.

With regard to the articles of the civil code that govern the financial statements, the following should be noted:

  • art. 2423-ter which introduces the concept of compulsory schemes;
  • Articles 2424 and 2424-bis which regulate the structure and content of the balance sheet;
  • Articles 2425 and 2425-bis which regulate the structure and content of the income statement;
  • art. 2427 which governs the content of the explanatory notes;
  • art. 2428 which governs the management report.

The adoption of the balance sheet and income statement formats it is mandatory, they are therefore "rigid" models. The compulsory nature is quite evident where, in the first paragraph of art. 2423-ter, it is clearly stated that the accounting items of the corporate assets: "Except for the provisions of special laws for companies that carry out particular activities, the balance sheet and income statement must be entered separately, and in the order indicated".

However it is one not absolute stiffness, because in the following paragraphs they have been introduced some elements of elasticity, in order to allow a more adequate representation of the peculiar traits of the various classes of companies, with particular consideration to the dimensional configuration of the exercise of activities other than industrial and commercial ones.

The abbreviated budget

The financial statements in "abbreviated" form governed by article 2435-bis of the civil code, it represents a simplified version of the “ordinary” budget model. This form of financial statements is intended for smaller companies and provides for a substantial reduction in the information content both in terms of the financial statements and as regards the preparation of the explanatory notes and the management report.

The abbreviated budget arises from the need to differentiate the degree of disclosure transparency of the accounting results in relation to the role of companies in the social context in which they operate, it is thus used to meet the information needs of small companies. The preparation of the financial statements in abbreviated form by small companies it is not an obligation, but a faculty. You have the right to draw up the financial statements in abbreviated form, when the company in the first financial year (with reference to the establishment) or subsequently, for two consecutive financial years, has not exceeded two of the three dimensional limits that are provided for by article 2435-bis of the civil code. Within the abbreviated form of the financial statements we find a further simplified form (abbreviated simplified), namely the one pursuant to art. 2435-bis of the Italian Civil Code characterized by a balance sheet in which items A and D of the assets are included in IIC and the item E of the liabilities is included in D.

The size limits for the abbreviated budget
Not all companies can draw up the financial statements in abbreviated form, the first paragraph of art. 2435-bis of the Italian Civil Code allows its use to joint stock companies: which have not issued securities traded on regulated markets and if in the first year or for two consecutive years they do not exceed at least two of the following three parameters:
▶ 4.400.000 of total assets;
▶ 8.800.000 in revenues from sales and services;
▶ 50 employees employed on average during the year.

If these limits are not exceeded in the first financial year from the constitution, the company will be able to opt for the abbreviated version starting from the first financial statements following the same. If the company that has chosen to draw up the report in abbreviated form exceeds two of the aforementioned limits for the second consecutive year, it is obliged to draw up the financial statements in ordinary form. The obligation arises for the financial statements of the second consecutive year in which two of the limits indicated above have been exceeded.

Why choose the abbreviated financial statements: Simplification of accounting statements

Among the immediate advantages related to the choice of the abbreviated budget, there is the significant simplification of accounting statements, in particular of the Balance Sheet. With reference to the structure of the quantitative statements, the abbreviated form financial statements provide for the possibility of combining some items of the assets and liabilities of the balance sheet. The latter comes to include only the items marked in article 2424 with capital letters and with Roman numerals in particular:

▶ "Receivables from shareholders for payments still due" and "Accrued income and prepaid expenses" can be included in the item "Receivables" of the current assets;
▶ "Accrued liabilities and deferred income" can be included in "Payables";
▶ Fixed assets must be entered at their gross value and the deductions for depreciation and write-downs must be explicitly indicated.

The income statement is also subject to amalgamations as art. 2435-bis of the Italian Civil Code allows for the mere grouping of items.

Grouping of income statement items

  • A2 / A3, "Changes in inventories of work in progress, semi-finished and finished products" "Changes in work in progress on order"
  • B9 © / (d) / (e) "Severance indemnity" "Pensions" "Other personnel costs"
  • B10/ (b) / (c) "Amortization of intangible fixed assets" "Amortization of tangible fixed assets" "Other write-downs of fixed assets"
  • C16/ (c) "Financial income from securities held in fixed assets that are not fixed assets" "Financial income from securities recognized in current assets that do not constitute equity investments"
  • D18/ (b) / (c) "Revaluations of equity investments" "Revaluations of financial fixed assets that are not fixed assets" "Revaluations of securities included in current assets that do not constitute equity investments"
  • D19/ (b) / (c) "Write-downs of equity investments" "Write-downs of financial fixed assets that do not constitute equity investments" "Write-downs of securities included in current assets that do not constitute equity investments"

Why choose abbreviated financial statements: Advantages on the explanatory notes and on the management report

The advantages granted by art. 2435-bis regarding the explanatory notes and management report. The supplementary note is emptied of numerous tables and reports which, otherwise, should also be prepared through complex non-accounting information, for example for the movement of fixed assets or, for the details of prepaid and deferred taxes.

As regards the management report, art. 2435-bis allows the prospectus to be omitted, the last paragraph of the aforementioned article provides, in fact, that: if the companies that can prepare the financial statements in abbreviated form, provide in the explanatory notes the information required by numbers 3) and 4) of the 2428, they are exempted from drawing up the management report.

Or:
▶ the number and par value of both treasury shares and shares or stakes in parent companies owned by the company, including through a trust company or an intermediary, with an indication of the corresponding share of capital;
▶ the number and par value of both treasury shares and shares or stakes in parent companies purchased or sold by the company, during the year, including through a trust company or an intermediary, with an indication of the corresponding part of capital, the considerations and the reasons for the purchases and disposals.

The "mixed" budget (not compatible with the taxonomy XBRL)

The art. 2435-bis of the Italian Civil Code allows companies that possess the necessary requisites to to simplify the structure and content of the accounting statements that make up the financial statements. The law provides for a series of faculties that could be exploited "even partially" by the person who draws up the document. In particular, it is possible to provide for some parts of the balance sheet a detail of the ordinary version which would lead to the drafting of a mixed balance sheet, that is, a document halfway between the ordinary and the abbreviated one (normal or simplified).

However, the solution of the "mixed" financial statements is not compatible with the provisions of the current Xbrl taxonomy, which provides for only three versions of accounting statements:
▶ the ordinary form;
▶ the abbreviated form;
▶ the abbreviated form "simplified".

We remind you that the presentation of the financial statements in the format XBRL it is none other than a different way of presenting the same results with a different language using the so-called reading codes (“or taxonomies”) which allow the tax authorities to analyze the values ​​of the income statement and balance sheet according to new elements. Taxonomies XBRL they can be defined as a dictionary of accounting items containing the definitions, translations, relationships and concepts underlying the information that is represented in the accounting document.

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