Dispositions - Instructions for the preparation of financial statements by microcredit operators and minor guarantee funds

The present document is consistent with the original contained in the archives of the Bank of Italy Digitally signed by Legal Headquarters Via Nazionale, 91 - P.O. Box 2484 - 00100 Rome - Paid-in Capital Euro 156,000.00 Tel. 06/47921 - telex 630045 BANKIT - VAT No. 00950501007 - www.bancaditalia.it

THE BANK OF ITALY
"The Financial Statements of Non-IFRS Intermediaries" HAVING REGARD TO Article 43, first paragraph, of Legislative Decree No. 136 of 18 August 2015, which, with reference to non-IFRS intermediaries as defined in Article 1, paragraph 1, letter d) of the same Legislative Decree, grants the Bank of Italy the power to issue provisions regarding the technical forms, on an individual and consolidated basis, of the financial statements and account statements intended for the public, as well as the methods and deadlines for the publication of the account statements ISSUES the attached provisions, to which non-IFRS intermediaries must adhere for the preparation of the individual company financial statement and the consolidated financial statement, which constitute an integral part of this decision. These provisions apply starting from the individual company financial statement and the consolidated financial statement relating to the fiscal year closed or ongoing as of December 31, 2016, except for the exceptions indicated below. The information in the explanatory notes contained in Tables 7.4 "Changes in the fiscal year in Deferred Tax Assets" and 7.5 "Changes in the fiscal year in Deferred Tax Liabilities" of Part B "Information on the Balance Sheet" and the flow data contained in Part D "Other Information", Section 1 "Specific references on the activity carried out" of the explanatory note, apply to financial statements relating to the fiscal year closed or ongoing as of December 31, 2017. The remaining information requested in tabular form in the explanatory note may be provided in free form, rather than according to the prescribed tables, only in the individual company financial statement and the consolidated financial statement relating to the fiscal year closed or ongoing as of December 31, 2016. Rome, 2 August 2016 The Governor Ignazio Visco

THE FINANCIAL STATEMENTS
OF NON-IFRS INTERMEDIARIES

CHAPTER 1. - GENERAL PRINCIPLES
1. RECIPIENTS OF THE PROVISIONS .....................................................................................................2
2. CONTENT OF THE FINANCIAL STATEMENT ................................................................................................................3
3. FINANCIAL STATEMENT FORMS .......................................................................................................................4
4. LINK BETWEEN ACCOUNTING AND FINANCIAL STATEMENT .................................................................................5
5. DEFINITIONS .......................................................................................................................................6
5.1. Customers ...................................................................................................................................6
5.2. "On-demand" Receivables ........................................................................................................................6
5.3. Banks ......................................................................................................................................6
5.4. Financial Institutions ...........................................................................................................................6
5.5. Intangible Fixed Assets ...........................................................................................................................7
5.6. Tangible Fixed Assets ...............................................................................................................................7
5.7. Financial Fixed Assets ............................................................................................................................7
5.8. Securities that do not constitute financial fixed assets .......................................................................................8
5.9. Companies included in consolidation .........................................................................................................8
5.10.Hedging operations ........................................................................................................8
5.11.Off-balance sheet operations ......................................................................................................8
5.12.Shareholdings ...........................................................................................................................8
5.13.Value adjustments ...................................................................................................................9
5.14.Value reversals ......................................................................................................................9
5.15.Non-performing loans ................................................................................................................................9
5.16.Other impaired exposures .....................................................................................................9
5.17.Securities ........................................................................................................................9
5.18.Quoted securities ...........................................................................................................................9
5.19.Productive microcredit ...........................................................................................................9
5.20.Social microcredit ...............................................................................................................10
5.21.Financial microleasing .........................................................................................................10
5.22.Mutualistic and solidarity finance operations .........................................................................10
CHAPTER 2. - THE INDIVIDUAL COMPANY FINANCIAL STATEMENT
1. GENERAL PROVISIONS ...................................................................................................................12
1.1 Change in accounting criteria ..............................................................................................12
2. PROVISIONS REGARDING SPECIFIC OPERATIONS ..................................................................15
2.1. Securities transactions .................................................................................................................15
2.2. "Pool" operations ..............................................................................................................15
2.3. Repos and repurchase agreements .............................................................................15
2.4. Assets pledged or received as collateral .....................................................................................16
2.5. Financial microleasing operations ..................................................................................16
2.6. Deferred taxation .................................................................................................................... 16
3. THE BALANCE SHEET ................................................................................................................19
3.1. Assets .....................................................................................................................................19
3.2. Liabilities ...................................................................................................................................22
3.3. Guarantees issued and commitments .................................................................................................25
4. THE INCOME STATEMENT .....................................................................................................................26
4.1. Income Statement ....................................................................................................................26
5. THE EXPLANATORY NOTE ....................................................................................................................32
5.1. Preamble .................................................................................................................................32
5.2. Part A – Accounting Policies ...................................................................................................32

5.3. Part B – Information on the Balance Sheet .....................................................................33
5.4. Part C – Information on the Income Statement .........................................................................40
5.5. Part D – Other Information ..................................................................................................41
6. THE MANAGEMENT REPORT ......................................................................................................52
CHAPTER 3. - THE CONSOLIDATED FINANCIAL STATEMENT
1. GENERAL PROVISIONS ...................................................................................................................54
2. CONSOLIDATION METHODS .......................................................................................................56
2.1. Full consolidation ...............................................................................................................................56
2.2. Proportional consolidation ..............................................................................................58
2.3. Net equity .....................................................................................................................59
3. THE CONSOLIDATED BALANCE SHEET .........................................................................................61
3.1. Assets .....................................................................................................................................61
3.2. Liabilities ...................................................................................................................................61
4. THE CONSOLIDATED INCOME STATEMENT ..............................................................................................63
5. THE CONSOLIDATED EXPLANATORY NOTE .............................................................................................64
5.1. Preamble ................................................................................................................................64
5.2. Part A – Accounting Policies ..................................................................................................64
5.3. Part B – Information on the Consolidated Balance Sheet .................................................64
5.4. Part C – Information on the Consolidated Income Statement ......................................................66
5.5. Part D – Other Information ..................................................................................................66
6. THE CONSOLIDATED MANAGEMENT REPORT ...............................................................................68
APPENDIX A - INDIVIDUAL COMPANY FINANCIAL STATEMENT FORMS
A.1 BALANCE SHEET ....…………………………………………………………………….......70
A.2 INCOME STATEMENT ....………………………………………..…...……………………………..73 A.3 EXPLANATORY NOTE ....…………………………………………………………………………..75
APPENDIX B - CONSOLIDATED FINANCIAL STATEMENT FORMS
B.1 CONSOLIDATED BALANCE SHEET ………...………………………………………...……...109 B.2 CONSOLIDATED INCOME STATEMENT ………………………………………….…………………112
B.3 CONSOLIDATED EXPLANATORY NOTE ....……………………………………………………….....114
APPENDIX C. - EQUITY RATIOS AND CONSOLIDATION DIFFERENCES
1. EQUITY RATIOS ..............................................................................................................................148
2. CONSOLIDATION DIFFERENCES ….............................................................................................149
2.1 Negative consolidation difference arising from a direct controlling interest
…………………………………………………… …………………………….149
2.2 Positive consolidation difference arising from a direct controlling interest
……………………………...………………………………………………………..149
2.3 Negative consolidation differences arising from direct and indirect controlling interests .................................................................................................................................150

Chapter 1 – General Principles
CHAPTER 1. - GENERAL PRINCIPLES

Chapter 1 – General Principles
Paragraph 1 – Recipients of the provisions

1. Recipients of the provisions
   Non-IFRS intermediaries (hereinafter "the intermediary" or "the intermediaries") referred to in Article 1 of Legislative Decree No. 136 of 18 August 2015 ( ) (hereinafter "the Decree") prepare for each fiscal year the individual company financial statement and, where the conditions are met, the consolidated financial statement in accordance with the provisions of the aforementioned "Decree" and those contained in this decision. 1 These are microcredit operators registered in the list referred to in Article 111 of the Consolidated Law on Banking and Credit, Legislative Decree No. 385 of 1 September 1993 (hereinafter TUB) and guarantee funds registered in the list referred to in Article 112-bis of the TUB.

Chapter 1 – General Principles
Paragraph 2 – Content of the financial statement
2. Content of the financial statement
The individual company financial statement and the consolidated financial statement consist of the balance sheet, the income statement, and the explanatory note. They are accompanied by a management report by the directors on the operations of, respectively, the intermediary and the group of companies included in the consolidation. The individual company financial statement and the consolidated financial statement are prepared with clarity and represent fairly the financial position, the financial situation, and the economic result of the fiscal year. If the information required by the provisions of the "Decree" and those contained in this decision are not sufficient to give a true and fair view, complementary information necessary for this purpose is provided in the explanatory note. If, in exceptional cases, the application of one of the aforementioned provisions is incompatible with a true and fair view, it must not be applied (Article 2, paragraph 5, of the "Decree"). The reasons for the derogation and its influence on the representation of the financial position, the financial situation, and the economic result are explained in the explanatory note. In the individual company financial statement, any profits arising from the derogation are recorded in a non-distributable reserve unless distributed to the extent corresponding to the value recovered through disposals or amortization.

Chapter 1 – General Principles
Paragraph 3 – Financial statement forms
3. Financial statement forms
The forms of the balance sheet, income statement, and explanatory note relating to the individual company financial statement are indicated in Appendix A of these provisions, those relating to the consolidated financial statement in Appendix B. The balance sheet and income statement forms consist of items (marked with Arabic numerals), sub-items (marked with letters), and further informational details (the "of which" of the items and sub-items). The items, sub-items, and their related informational details constitute the accounts of the financial statement. The addition of new items is permitted, provided that their content is not attributable to any of the items already provided for in the forms and only if they represent material amounts. Other information, also referring to any added items, may be provided in the explanatory note. In particular, in the explanatory note, the intermediary must insert the information deemed necessary for a correct representation of the financial position, the financial situation, and the economic result of the fiscal year. The sub-items provided for in the forms may be grouped when either of the following two conditions occurs:
a) the amount of the sub-items is immaterial; b) the grouping favors the clarity of the financial statement; in this case, the explanatory note must contain separately the sub-items subject to grouping. For each account of the balance sheet and income statement, the amount of the previous fiscal year must also be indicated. If the accounts are not comparable, those relating to the previous fiscal year must be adapted; the non-comparability and the adaptation or the impossibility thereof are signaled and commented on in the explanatory note. In the balance sheet and income statement, accounts that do not present amounts for either the fiscal year to which the financial statement refers or the previous one are not indicated. If an element of assets or liabilities falls under more than one item of the balance sheet, in the explanatory note it must be noted, if necessary for the understanding of the financial statement, its referability also to items other than the one in which it is recorded.

Chapter 1 – General Principles
Paragraph 4 – Link between accounting and financial statement
4. Link between accounting and financial statement
The methods of maintaining the accounting system (chart of accounts, accounting criteria, etc.) adopted by the intermediaries must allow for the linkage between accounting results and the accounts of the financial statement. To this end, all informational elements necessary to ensure such linkage must be present and easily retrievable in the information-accounting system; when preparing the financial statement, consistency between systematic accounting evidence and the accounts of the financial statement must be ensured, however, also through specific reclassification entries. Similarly, all informational elements necessary to prepare the explanatory note must be present and easily retrievable in the information-accounting system.

Chapter 1 – General Principles
Paragraph 5 – Definitions
5. Definitions
The definitions of the most recurring terms and expressions in these provisions are indicated below.
5.1. Customers
All subjects other than banks and financial institutions fall into this category.
5.2. "On-demand" Receivables
Deposits that can be withdrawn by the intermediary at any time without notice or with 24 hours or one working day notice are considered "on-demand" receivables. The notice period is that between the date on which the notice is notified and the date on which the repayment becomes due. Receivables with a contractual maturity constraint equal to 24 hours or one working day are also included among "on-demand" receivables.
5.3. Banks
The following fall into this category:
a) EU banks authorized by the competent supervisory authorities and included in the list referred to in Article 20, paragraph 2 of Directive 2013/36/EU; b) non-EU banks authorized by the competent supervisory authorities to carry out the activity of a bank as defined in Article 4, paragraph 1, point 1, of Regulation (EU) No. 575/2013 (hereinafter "the Regulation"); c) central banks.
5.4. Financial Institutions
For the purposes of these provisions, the following fall into this category:
a) Savings Management Companies and SICAVs referred to in Legislative Decree No. 58 of 24 February 1998; b) holding financial companies of banking groups registered in the roll referred to in Article 64 of the TUB; c) securities intermediation companies referred to in Article 1, paragraph 1, letter e), of Legislative Decree No. 58 of 24 February 1998 (hereinafter TUF); d) holding financial companies of groups of SIMs registered in the roll referred to in Article 11, paragraph 1 bis of the TUF; e) holding financial companies of financial groups registered in the roll referred to in Article 110 of the TUB;

Chapter 1 – General Principles
Paragraph 5 – Definitions f) subjects operating in the financial sector provided for by Titles V, V-bis, and V-ter of the TUB as well as financial companies exercising other financial activities indicated in Article 59, paragraph 1, letter b), of the same TUB; g) microcredit operators and minor guarantee funds referred to in Article 1 letters a) and b) of the Decree; h) foreign financial companies carrying out activities analogous to those exercised by the companies referred to in the preceding letters.
5.5. Intangible Fixed Assets
The following are considered intangible fixed assets if recorded in the asset accounts:
a) setup and expansion costs and development costs, when they have multi-year utility; b) goodwill, if acquired for consideration; c) patent rights and rights to use works of ingenuity, concessions, licenses, trademarks, similar rights and assets, and related advances paid; d) other multi-year costs (e.g., restructuring expenses for properties not owned). Expenses for software recorded in assets constitute intangible fixed assets if the asset is in the full ownership of the intermediary or if this is the holder of a right of use. The multi-year costs referred to in letters a), b), and d) may be recorded in the asset accounts only with the consent of the supervisory body, if constituted.
5.6. Tangible Fixed Assets
The following are considered tangible fixed assets:
a) land, buildings, technical plants, equipment of any type, advances paid for the purchase or construction of such assets, and fixed assets under construction. Land and buildings include all real rights of enjoyment on real estate and rights assimilable to these under the legislation of the country where the asset is located; b) other material assets intended to be used durably by the company.
5.7. Financial Fixed Assets
The following are considered financial fixed assets:
a) shareholdings, including those in companies included in consolidation; b) securities and other marketable securities intended to be used durably by the company, i.e., intended to be maintained in the corporate assets for the purpose of stable investment. The securities and other marketable securities referred to in letter b) are defined as "fixed securities".

Chapter 1 – General Principles
Paragraph 5 – Definitions
5.8. Securities that do not constitute financial fixed assets
Securities and other marketable securities not intended for stable corporate investment fall into this category.
The aforementioned securities and other marketable securities are defined as "non-fixed securities".
5.9. Companies included in consolidation
The controlling intermediary or companies operating under unified direction and controlled companies, wherever established, are included in consolidation in accordance with Article 25 of the "Decree". For the purposes considered here, control and unified direction occur in the cases provided for in Articles 1 and 23 of the "Decree".
5.10. Hedging operations
Off-balance sheet "hedging" operations are those carried out by the intermediary with the purpose of protecting against the risk of adverse changes in interest rates, exchange rates, or market prices, the value of individual assets or liabilities in the balance sheet or "off-balance sheet" (e.g., of a specific security