QUESTIONNAIRE ON IFRIC 12 SERVICE CONCESSION ARRANGEMENTS

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Emory Bates
5 years ago
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1 QUESTIONNAIRE ON IFRIC 12 SERVICE CONCESSION ARRANGEMENTS Preparer TERNA. - Trasmissione Elettricità Rete Nazionale S.p.A. The company is the 98 % owner of the Italian Transmission Grid and also manages the relating transmission, dispatching and securing; the company is also responsible for determining the balance between electricity supply and demand. Italy TERNA - Trasmissione Elettricità Rete Nazionale S.p.A. Via Arno, ROMA Attention: Mr Luciano Di Bacco Phone number: E_mail address: lucianodibacco@terna.it No European Union 1

2 (keuro)

3 Yes We recognise that Service Concession Arrangements (SCA) accounting rules would be helpful to eliminate current wide diversity of financial statements presentation and resulting lack of consistency and comparability of European companies. Neverthless we believe that IFRIC 12 contains weaknesses and is unclear. We believe that the recognition and measurement of SCA should be set out in a comprehensive standard rather than an Interpretation. Yes Partly Partly No 1. According to IFRIC 12 requirements we believe that operators financial statements would be mainly affected in terms of reclassifications rather than adjustments to relevant accounting figures (total assets, equity, operating and net income). 2. The scope requirements paragraphs are unclear. Consequently many inconsistencies could still live on. 3. The IFRIC 12 Intangible asset model accounting model would require to initially measure the intangible asset at fair value. This approach is questionable due to the sensitivity of assessing fair values in absence of proper market valuations especially in the absence of free market of concessions. In Italy concessions are unique and cover not replaceable assets. 3

4 Partly See the comments included in b) Yes Because it is a key topic for a lot of large companies Neither of them We believe that IFRIC 12 endorsement wouldn t be convenient. Infact, if the IASB should reach different conclusion many inconsistencies could result. Costs Due to Italian regulatory and tax requirements we would be enforced to keep two different sets of accounting; one for statutory and tax purposes and another for regulatory purposes, which requires the unbundling under the regulatory rules. In detail we would be enforced to keep different accounting records related to assets, depreciation and income covered by the concessions. Benefits Apart from the elimination of inconsistencies between the statements of many European companies managing similar business, we cannot recognize valuable benefits as a consequence of IFRC 12 application. 4

5 Significant Turnover approximates Euro million (roughly 95% of total turnover) The most relevant effects concern No recognition of tangible assets Recognition of an intangible asset based on fair value determined as of inception date (please take into consideration the above difficulties to determine the fair value, even in the case we would be enforced to revert to alternative way of measuring it) Neither of them We are still in the process to assess if our SCA fall within the scope. That is a very challenging objective as the specific IFRIC 12 guidance is poor and controversial. The Interpretation should include a Glossary covering some relevant definitions (for instance, public sector, private sector and control). We have a lot of concerns about when the endorsment date is expected to occur if compared to the date the Interpretation becomes effective (January 1, 2008). Should the Interpretation be endorsed in the course of 2008 fiscal year, (i) which would be the reliability of the financial position and performance included in the 2008 interim financial reports already published? (ii) due to the pervasive effects of IFRIC 12 application, how could the entities meet the tight deadlines for publishing the remaining interim financial reports imposed by the national regulators? We strongly claim for postponing the application of the IFRIC 12 waiting for an exhaustive standard. The entity is applying the requirements of the existing standards. Regardless the IFRIC 12, the infrastructures are recognised within the assets according to IAS 16 requirements. 5

6 No No, due to the fact we are applying the existing standards for both internal reports and regulatory purposes 6

7 n\a n\a n\a 7

8 Just internal analysis were carried out. We have serious concerns about two main issues: 1. How should be intended relevant terms as public and private sector; residual interest; and control? In this regard, we wish to point out that the Company born from a privatization process of the Italian state-owned company, who managed in former years the electric industry. For this reasons, the SCA is peculiar and has specific feautures. The national grid is legally owned by the Company. 2. The scope requirements paragraphs are unclear. Consequently many inconsistencies could still live on and different accounting for analogous transactions could occurr. We claim for the non-endorsement of the IFRIC 12 waiting for an exhaustive standard. 8

Questionnaire EFFECT STUDY ON IFRIC 12 SERVICE CONCESSION ARRANGEMENTS

Questionnaire EFFECT STUDY ON IFRIC 12 SERVICE CONCESSION ARRANGEMENTS Please provide the following details together with your response: X Preparer User Other (please specify) REN- Redes Energéticas Nacionais