Criteria for Assessment of the IASC Standards

Are the Core Standards Sufficiently Comprehensive?

Q.1 Do the core standards provide a sufficiently comprehensive accounting framework to provide a basis to address the fundamental accounting issues that are encountered in a broad range of industries and a variety of transactions without the need to look to other accounting regimes? Why or why not?

Yes, the core standards provide a sufficiently comprehensive accounting framework for main stream industry, trade and service rendering companies.

Q.2 Should we require use of U.S. GAAP for specialized industry issues in the primary financial statements or permit use of home country standards with reconciliation to U.S. GAAP? Which approach would produce the most meaningful primary financial statements? Is the approach of having the host country specify treatment for topics not addressed by the core standards a workable approach? Is there a better approach?

SEC should permit use of home country standards with reconciliation to U.S. GAAP for specialized industry issues in the primary financial statements. Moreover, the IASC is now developing some industry standards (e.g. a standard devoted specifically to the extractive industries) which could be taken into account by the IOSCO as a basis to develop a generally accepted set of international industry standards.

Q.3 Are there any additional topics that need to be addressed in order to provide a comprehensive set of standards?

Not that we can think of.

Are the IASC Standards of Sufficiently High Quality? Why or Why Not?

Q.4 Are the IASC standards of sufficiently high quality to be used without reconciliation to U.S. GAAP in cross-border filings in the United States? Why or why not? Please provide us with your experience in using, auditing or analyzing the application of such standards. In addressing this issue, please analyze the quality of the standard(s) in terms of the criteria we established in the 1996 press release. If you considered additional criteria, please identify them.

Based on our experience IASC standards are of sufficiently high quality to deliver consistent, comparable, transparent, relevant and reliable financial information.

Q.5 What are the important differences between U.S. GAAP and the IASC standards? We are particularly interested in investors' and analysts' experience with the IASC standards. Will any of these differences affect the usefulness of a foreign issuer's financial information reporting package? If so, which ones?

Eni uses (or will soon use) IASC standards to integrate domestic accounting standards in the following subjects:

We believe that even within a certain set of accounting standards, the outcomes of the key figures will always be the result of choices and assessment of the management of the company; these choices and assessment will always demand a careful analysis if different companies are to be compared.

Q.6 Would acceptance of some or all of the IASC standards without a requirement to reconcile to U.S. GAAP put U.S. companies required to apply U.S. GAAP at a competitive disadvantage to foreign companies with respect to recognition, measurement or disclosure requirements?

We have no comment on this.

Q.7 Based on your experience, are there specific aspects of any IASC standards that you believe result in better or poorer financial reporting (recognition, measurement or disclosure) than financial reporting prepared using U.S. GAAP? If so, what are the specific aspects and reason(s) for your conclusion?

With regard to the impairment of assets, we prefer IASC standards when they require an impairment loss to be recognized comparing directly the carrying amount with the discounted future cash flows. On the other hand, the same standards are not realistic when they require the recoverable amount to be always measured as the higher of net selling price and value in use; besides, it is not clear how the pre-tax discount rate should be determined.

With respect to provisions for risks and charges, IASC standards omit to indicate the discount rate to be used.

Can the IASC Standards be Rigorously Interpreted and Applied?

The Experience to Date

Q.8 Is the level of guidance provided in IASC standards sufficient to result in a rigorous and consistent application? Do the IASC standards provide sufficient guidance to ensure consistent, comparable and transparent reporting of similar transactions by different enterprises? Why or why not?

Yes. Generally, in the appendices to IASC standards there are enough examples and specifications to provide a sufficient level of guidance for a rigorous and consistent application.

Q.9 Are there mechanisms or structures in place that will promote consistent interpretations of the IASC standards where those standards do not provide explicit implementation guidance? Please provide specific examples.

We have no comment on this.

Q.10 In your experience with current IASC standards, what application and interpretation practice issues have you identified? Are these issues that have been addressed by new or revised standards issued in the core standards project?

In order to enhance comparability among different companies financial statements, it would be useful to specify further financial statements structure, especially the income statement structure, providing, in particular, the definitions of operating and non operating items and of non recurrent items in operating income.

Q.11 Is there significant variation in the way enterprises apply the current IASC standards? If so, in what areas does this occur?

We have no comment on this.

The Need for a Financial Reporting Infrastructure

Q.12 After considering the issues discussed in (i) through (iv) below, what do you believe are the essential elements of an effective financial reporting infrastructure? Do you believe that an effective infrastructure exists to ensure consistent application of the IASC standards? If so, why? If not, what key elements of that infrastructure are missing? Who should be responsible for development of those elements? What is your estimate of how long it may take to develop each element?

We have no comment on this.

The Interpretive Role of the Standard-Setter

Q.13 What has your experience been with the effectiveness of the SIC in reducing inconsistent interpretations and applications of IASC standards? Has the SIC been effective at identifying areas where interpretive guidance is necessary? Has the SIC provided useful interpretations in a timely fashion? Are there any additional steps the IASC should take in this respect? If so, what are they?

We have not used SIC interpretations so far; we suggest, however, the introduction of new communication procedures between the companies and the SIC, consistently with the various practical needs of preparers of financial statements.

Q.14 Do you believe that we should condition acceptance of the IASC standards on the ability of the IASC to restructure itself successfully based on the above characteristics? Why or why not?

Present assessment of IASC core standards should be based on the high quality of the standards and not on IASC internal organization. The restructuring of the IASC will allow for a process-oriented approach to future standards.

The Role of the Auditor in the Application of the Standards

Q.15 What are the specific practice guidelines and quality control standards accounting firms use to ensure full compliance with non-U.S. accounting standards? Will those practice guidelines and quality control standards ensure application of the IASC standards in a consistent fashion worldwide? Do they include (a) internal working paper inspection programs and (b) external peer reviews for audit work? If not, are there other ways we can ensure the rigorous implementation of IASC standards for cross-border filings in the United States? If so, what are they?

We have no comment on this.

Q.16 Should acceptance of financial statements prepared using the IASC standards be conditioned on certification by the auditors that they are subject to quality control requirements comparable to those imposed on U.S. auditors by the AICPA SEC Practice Section, such as peer review and mandatory rotation of audit partners? Why or why not? Why or why not? If not, should there be disclosure that the audit firm is not subject to such standards?

We have no comment on this.

Q.17 Is there, at this time, enough expertise globally with IASC standards to support rigorous interpretation and application of those standards? What training have audit firms conducted with respect to the IASC standards on a worldwide basis? What training with respect to the IASC standards is required of, or available to, preparers of financial statements or auditors certifying financial statements using those standards?

We have no comment on this.

The Role of the Regulator in the Interpretation and Enforcement of Accounting Standards

Q.18 Is there significant variation in the interpretation and application of IASC standards permitted or required by different regulators? How can the risk of any conflicting practices and interpretations in the application of the IASC standards and the resulting need for preparers and users to adjust for those differences be mitigated without affecting the rigorous implementation of the standards?

We have no comment on this.

Q.19 Would further recognition of the IASC standards impair or enhance our ability to take effective enforcement action against financial reporting violations and fraud involving foreign companies and their auditors? If so, how?

We have no comment on this.

Q.20 We request comment with respect to ways to assure access to foreign working papers and testimony of auditors who are located outside the United States. For example, should we amend Regulation S-X to require a representation by the auditor that, to the extent it relied on auditors, working papers, or information from outside the United States, the auditor will make the working papers and testimony available through an agent appointed for service of process? If not, should we require that the lack of access to auditors' workpapers be disclosed to investors? Is there another mechanism for enhancing our access to audit working papers?

We have no comment on this.

Possible Approaches to Recognition of the IASC Standards for Cross-Border Offerings and Listings

Q.21 What has been your experience with the quality and usefulness of the information included in U.S. GAAP reconciliations? Please explain, from your viewpoint as a preparer, user, or auditor of non-U.S. GAAP financial statements, whether the reconciliation process has enhanced the usefulness or reliability of the financial information and how you have used the information provided by the reconciliation. Please identify any consequences, including quantification of any decrease or increase in costs or benefits, that could result from reducing or eliminating the reconciliation requirement.

Information included in U.S. GAAP reconciliations serve the needs of U.S. capital markets investors and analysts.

Q.22 Should any requirements for reconciliation differ based on the type of transaction (e.g., listing, debt or equity financing, rights offering, or acquisition) or the type of security (e.g., ordinary shares, convertible securities, investment grade or high yield debt)? Are there any other appropriate bases for distinction?


Q.23 If the current reconciliation requirements are reduced further, do you believe that reconciliation of a "bottom line" figure would still be relevant (e.g., presenting net income and total equity in accordance with U.S. GAAP)?

No, reconciliation of a bottom line figure would not be relevant, whilst producing it would be time consuming and expensive as a full reconciliation.

Q.24 Should any continuing need for reconciliation be assessed periodically, based on an assessment of the quality of the IASC standards?

Standing the need of presenting only one true and fair view of the results of the same company, we hope that an international board like the IOSCO will ensure compatibility between U.S. GAAP and future IASC standards, recognizing reconciliation requirements only when strictly necessary.

Q.25 The IASC standards finalized as part of the core standards project include prospective adoption dates. Most standards are not required to be applied until fiscal years beginning on or after January 1, 1998, at the earliest. Should we retain existing reconciliation requirements with respect to the reporting of any fiscal year results that were not prepared in accordance with the revised standards or simply require retroactive application of all revised standards regardless of their effective dates? If not, why not?

Generally, compliance with a new IASC standard requires directly reported comparative amounts to be restated on the same basis. We agree that a reconciliation might be required in respect of any standard which have not been applied to reported periods. However, by January 1, 2001 all the core standards will be effective.

Q.26 Does the existence of a reconciliation requirement change the way in which auditors approach financial statements of foreign private issuers? Also, will other procedures develop to ensure that auditors fully versed in U.S. auditing requirements, as well as the IASC standards, are provided an opportunity to review the financial reporting practices for consistency with those standards? If so, please describe these procedures. Alternatively, will the quality of the audit and the consistency of the application of the IASC standards depend on the skill and expertise of the local office of the affiliate of the accounting firm that conducts the audit?

Based on our experience audit conducted on primary financial statements is already accurate.