The law requires that the procedures for drawing up the consolidated financial statements, the structure and content of the elements of the consolidated balance sheet and income statement, as well as the valuation criteria, be maintained constant over time, so that the consolidated financial statements are consistent and comparable from year to year in the year. The same rule also states that changes can be made only in exceptional cases. In such cases, the explanatory notes must justify the exception and indicate the effects on the financial position and on the consolidated economic result.
The constant application over time of the drafting methods
The structure and the content, as well as the valuation criteria regards both the specific exposure and valuation criteria of the balance sheet items, and the items and aspects that arise during consolidation ( treatment of consolidation differences, proportional consolidation, accounting treatment of intercompany transactions, allocation of taxes on undistributed profits of subsidiaries, etc.).
Changes in estimation procedures (not to be confused with the changes that are the subject of this paragraph), where circumstances so require, do not invalidate the criterion of continuity, as they are inherent in the process of preparing the financial statements.
Although it is not absolutely possible to define the exceptional cases in which the criteria can be modified, these cases must be rare, the reason for the change must derive from previously non-existent or unforeseeable acts or facts, the change must take place between criteria equally acceptable between those provided for by the law and by the correct accounting standards and the new criterion must be preferable to the previous criterion for the purposes of truthful and correct representation of the consolidated financial statements.
Consolidation of Financial
Any change in the criteria for the preparation of the consolidated financial statements or valuation criteria must be duly justified in the explanatory notes, with an indication of their effects in terms of the increase or reduction of the net equity and profit (loss) of the group (and of the portion attributable to minority interests), as well as, in the case of changes in the classification of items in the financial statements, its effects on the structure and content of the consolidated balance sheet and income statement.