(by Saverio Bozzolan, Professor of Accounting, Department of Business and Management, LUISS Guido Carli University)
29/09/2015
It is a wide discussion about false financial statements and what matters in order to identify an accounting fraud. Previous Italian law on False Financial Statements (D.Lgs 61/2002) sanctions directors, CEOs, CFOs, statutory auditors if they omit to disclose information when the disclosure is requested by law or if financial statements contain numbers that do not provide a truthful representation of the firm’s economic and financial situation, even when they are obtained through subjective valuation.
The recently promulgated law on False Financial Statements (Law 69/15) takes out all the valuations as an element that can determine an accounting fraud. This change has definitely affected the criminal relevance of accounting valuations taking out their role. According to many commentators, the new law opens a leak since accounting frauds cannot be determined by misevaluations or wrong estimates.
A recent sentence of the “Corte di Cassazione” (33774/15) provides an interesting interpretation of the new law. The motivations of the sentence are several and go to the same direction. For example, the violation of the “conservatism” principle in evaluating financial statements is no longer a sufficient condition for detecting an accounting fraud and for the persecution of those who are responsible. The same provision is for the valuation of credits in relation to the estimation of the bad debts: thus the adoption of the net realisable value is no longer questionable for accounting frauds. Along the same lines and even more significant, there is the valuation regarding tangible and intangible assets as well as the initial inscription (and the subsequent loss of value) of acquired goodwill.
What comes out from the sentence of “Corte di Cassazione” is clear: all estimated values in financial statements that are the result of a valuation process have no more relevance for an accounting fraud.
