Recently issued accounting standards

First-time adoption and applicable standards

The Group has adopted the following amendment to international accounting standards that took effect as from January 1, 2013:

  • “Amendment to IAS 1 - Presentation of items of other comprehensive income”, issued in June 2011. The amendment calls for the separate presentation of items of other comprehensive income (OCI) that may be reclassified to profit or loss in the future (“recycling”) and those that will not be recycled. The application of the amendment did not have a significant impact.
  • “IAS 19 - Employee benefits”, issued in June 2011; the standard supersedes the current IAS 19 governing the accounting treatment of employee benefits. The most significant change regards the requirement to recognize all actuarial gains/losses in OCI, with the elimination of the corridor approach. The amended standard also introduces more stringent rules for disclosures, with the disaggregation of the cost into three components; eliminates the expected return of plan assets; no longer permits the deferral of the recognition of past service cost in profit or loss; and introduces more detailed rules for the recognition of termination benefits. The impact of the application of the amended standard is summarized in note 4.
  • “IFRS 13 - Fair value measurement”, issued in May 2011; the standard represents a single IFRS framework to be used whenever another accounting standard requires or permits the use of fair value measurement. The standard sets out guidelines for measuring fair value and introduces specific disclosure requirements. The overall impacts on profit or loss and equity of the application, on a prospective basis, of the new standard were a positive €4 million and €46 million, respectively, mainly due to the new method used to determine counterparty risk, which also includes non-performance risk.
  • “Amendments to IFRS 7 - Offsetting financial assets andfinancial liabilities”, issued in December 2011, in parallel with the amendments to IAS 32; the amendments establish more extensive disclosures for the offsetting of financial assets and liabilities, with a view to enabling users of financial statements to assess the actual and potential effects on the entity’s financial position of netting arrangements, including the set-off rights associated with recognized assets or liabilities. The application of the new provisions did not have a significant impact.
  • “IFRIC 20 - Stripping costs in the production phase of a surface mine”, issued in October 2011; the interpretation sets out the accounting treatment to be applied to costs incurred for the removal of mine waste materials during the production phase, clarifying when they can be recognized as an asset. The application of the new interpretation did not have an impact on the consolidated financial statements.
  • “Annual Improvements to IFRSs 2009-2011 Cycle”, issued in May 2012; the document contains formal modifications and clarifications of existing standards. The application of the new provisions did not have a significant impact for the Group. More specifically, the following standards have been amended:
    • “IAS 1 - Presentation of financial statements”; the amendment clarifies how comparative information must be presented in the financial statements and specifies that an entity may voluntarily elect to provide additional comparative information;
    • “IAS 16 - Property, plant and equipment”; the amendment clarifies that if spare parts and servicing equipment meet the requirements for classification as “property, plant and equipment” they shall be recognized and measured in accordance with IAS 16; otherwise they shall be classified as inventory;
    • “IAS 32 - Financial instruments: presentation”; the amendment establishes that income taxes relating to distributions to equity holders and to transaction costs of equity transactions shall be accounted for in accordance with IAS 12;
    • “IAS 34 - Interim financial reporting”; the amendment clarifies that interim financial reports shall specify the total assets and liabilities for a particular reportable segment only if such amounts are regularly provided by the chief operating decision maker and if there has been a material change from the amount disclosed in the last annual financial statements presented.

    Standards not yet applicable and not yet adopted

    In 2012 and 2013, the European Commission endorsed the following accounting standards and interpretations, which will be applicable to the Group in future years:

    • “IFRS 10 - Consolidated financial statements”, issued in May 2011; replaces “SIC 12 - Consolidation - special purpose entities” and, for the part concerning consolidated financial statements, “IAS 27 - Consolidated and separate financial statements”, the title of which was changed to “Separate financial statements”. The standard introduces a new approach to determining whether an entity controls another (the essential condition for consolidating an investee), without modifying the consolidation procedures envisaged in the current IAS 27. This approach must be applied to all investees, including special purpose entities, which are called “structured entities” in the new standard. While current accounting standards give priority – where control does not derive from holding a majority of actual or potential voting rights – to an assessment of the risks/ benefits associated with the holding in the investee, IFRS 10 focuses the determination on three elements to be considered in each assessment: power over the investee; exposure to variable returns from the involvement in the investee; and the link between power and returns, i.e. the ability to use that decision-making power over the investee to affect the amount of returns. The accounting effects of a loss of control or a change in the ownership interest that does not result in a loss of control are unchanged with respect to the provisions of the current IAS 27. The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The application of the new provisions will not have an impact on the Group.
    • “IAS 27 - Separate financial statements”, issued in May 2011. Together with the issue of IFRS 10 and IFRS 12, the current IAS 27 was amended, with changes to its title and its content. All provisions concerning the preparation of consolidated financial statements were eliminated, while the other provisions were not modified. Following the amendment, the standard therefore only specifies the recognition and measurement criteria and the disclosure requirements for separate financial statements concerning subsidiaries, joint ventures and associates. The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The application of the new provisions will not have an impact on the Group.
    • “IFRS 11 - Joint arrangements”, issued in May 2011; replaces “IAS 31 - Interests in joint ventures” and “SIC 13 - Jointly controlled entities - non-monetary contributions by venturers”. Unlike IAS 31, which assesses joint arrangements on the basis of the contractual form adopted, IFRS 11 assesses them on the basis of how the related rights and obligations are attributed to the parties. In particular, the new standard identifies two types of joint arrangement: joint operations, where the parties to the arrangement have pro-rata rights to the assets and pro-rata obligations for the liabilities relating to the arrangement; and joint ventures, where the parties have rights to a share of the net assets or profit/loss of the arrangement. In the consolidated financial statements, accounting for an interest in a joint operation involves the recognition of the assets/ liabilities and revenues/expenses related to the arrangement on the basis of the associated rights/obligations, without taking account of the interest held. Accounting for an interest in a joint venture involves the recognition of an investment accounted for using the equity method (proportionate consolidation is no longer permitted). The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The application of the new standard will involve a change in the measurement of joint ventures, which will now be accounted for exclusively with the equity method. More specifically, while there will be no impact on the net income and equity of the Group, if IFRS 11 had been adopted for the purposes of preparing the consolidated financial statements at December 31, 2013, revenues for 2013 would have been about €1,800 million lower, while total assets at December 31, 2013 would have been about €700 million lower.
    • “IAS 28 - Investments in associates and joint ventures”, issued in May 2011. Together with the issue of IFRS 11 and IFRS 12, the current IAS 28 was amended, with changes to its title and its content. In particular, the new standard, which also includes the provisions of “SIC 13 - Jointly controlled entities - non-monetary contributions by venturers”, describes the application of the equity method, which in consolidated financial statements is used to account for associates and joint ventures. The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The future application of the new provisions will not have an impact on the Group, with the exception of the effects discussed earlier of the application of IFRS 11.
    • “IFRS 12 - Disclosure of interests in other entities”, issued in May 2011; IFRS 12 brings together in a single standard the required disclosures concerning interests held in subsidiaries, joint operations and joint ventures, associates and structured entities. In particular, the standard replaces the disclosures called for in the current IAS 27, IAS 28 and IAS 31 with new disclosure requirements in order to ensure the disclosure of more uniform and consistent information, introducing new requirements for disclosures concerning subsidiaries with significant non-controlling shareholders and individually material associates and joint ventures. The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The future application of the new provisions will require implementation of the new disclosure requirements.
    • “Amendments to IAS 32 - Offsetting financial assets and financial liabilities”, issued in December 2011. IAS 32 establishes that a financial asset and a financial liability should be offset and the net amount reported in the balance sheet when, and only when, an entity:
      1. has a legally enforceable right to set off the amounts; and
      2. intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
      The amendments to IAS 32 clarify the conditions that must be met for these two requirements to be satisfied. As regards the first requirement, the amendment expands the illustration of cases in which an entity “currently has a legally enforceable right of set-off”, while as regards the second the amendment clarifies that, where the entity settles the financial asset and liability separately, for set-off to be allowed the associated credit and liquidity risk should be insignificant and, in this regard, specifies the characteristics that gross settlement systems must have. The amendments will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The future application of the new provisions will give rise to the reclassification of a number of items in the consolidated balance sheet, with no impact on consolidated equity.
    • “Amendments to IFRS 10, IFRS 11 and IFRS 12 - Transition guidance”, issued in June 2012. The amendments are intended to clarify a number of issues concerning the first-time adoption of IFRS 10, IFRS 11 and IFRS 12. In particular, IFRS 10 was amended to clarify that the date of initial application of the standard shall mean “the beginning of the annual reporting period in which IFRS 10 is applied for the first time” (i.e. January 1, 2013). In addition, the amendments limited the comparative disclosures to be provided in the first year of application. IFRS 11 and IFRS 12 were amended analogously, limiting the effects, both in terms of restatement of financial data and of disclosures, of initial application of IFRS 11. The amendments will take effect retrospectively for periods beginning on or after January 1, 2014. The future application of the new provisions will not have a significant impact on the Group.
    • “Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment entities”, issued in October 2012. The amendments introduce an exception to the requirement under IFRS 10 to consolidate all subsidiaries if the parent qualifies as an “investment entity”. More specifically, investment entities, as defined in the amendments, shall not consolidate their subsidiaries unless the latter provide services associated with the investment activities of the parent. Non-consolidated subsidiaries shall be measured in conformity with IFRS 9 or IAS 39. The parent of an investment entity shall, however, consolidate all of its subsidiaries (including those held through the investment entity) unless it also qualifies as an investment entity. The amendments will take effect retrospectively for periods beginning on or after January 1, 2014. The future application of the new provisions will not have an impact on the Group.
    • “Amendments to IAS 36 - Recoverable amount disclosures for non-financial assets”, issued in May 2013. The amendments of IAS 36 as a consequence of the provisions of IFRS 13 did not reflect the intentions of the IASB concerning the disclosures to report about the recoverable amount of impaired assets. Consequently, the IASB amended the standard further, eliminating the disclosure requirements originally introduced by IFRS 13 and requiring specific disclosures concerning the measurement of fair value in cases in which the recoverable amount of impaired assets is calculated on the basis of fair value less costs of disposal. The amendments also require disclosures on the recoverable amount of assets or cash generating units for which an impairment loss has been recognized or reversed during the period. The amendments will take effect retrospectively for periods beginning on or after January 1, 2014. The future application of the new provisions will not have an impact on the Group.
    • “Amendments to IAS 39 - Novation of derivatives and continuation of hedge accounting”, issued in June 2013. The amendments are intended to allow entities, under certain conditions, to continue hedge accounting in the case of novation of the hedging instrument with a central counterpar161 ty as a result of the introduction of a new law or regulation. The amendments will take effect retrospectively for periods beginning on or after January 1, 2014. The future application of the new provisions will not have an impact on the Group.

    In the years from 2009 to 2013, the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) also published new standards and interpretations that, as of December 31, 2013, had not yet been endorsed by the European Commission. The rules that could have an impact on the consolidated financial statements of the Group are set out below:

    • “IFRS 9 - Financial instruments”, issued in November 2009 and subsequently revised: the standard is the first of three phases in the project to replace IAS 39. The standard establishes new criteria for the classification of financial assets and liabilities. Financial assets must be classified based on the business model of the entity and the characteristics of the associated cash flows. The new standard requires financial assets and liabilities to be measured initially at fair value plus any transaction costs directly attributable to their assumption or issue. Subsequently, they are measured at fair value or amortized cost, unless the fair value option is applied. As regards equity instruments not held for trading, an entity can make an irrevocable election to measure them at fair value through other comprehensive income. Any dividend income shall be recognized through profit or loss. In November 2013, a section on hedge accounting was introduced. The new provisions governing the recognition of the effects of hedging relationships call for risk management policies to be reflected in the financial statements, eliminating inconsistencies and weaknesses in the hedge accounting model in IAS 39. The current version of IFRS 9 does not address macro hedging, an issue that the IASB is still discussing. Accordingly, until the completion of the entire hedge accounting project, the standard permits entities to choose between applying the hedge accounting requirements of IFRS 9 and those of IAS 39. The amendments introduced in November 2013 also eliminated the reference to a mandatory effective date for the standard, which is available for immediate application. The Group, however, will not apply the standard before endorsement. The Group is assessing the potential impact of the future application of the new provisions.
    • “Amendments to IFRS 9 and IFRS 7 - Mandatory effective date and transition disclosure”, issued in December 2011. The amendment modifies “IFRS 9 - Financial instruments”, postponing the mandatory effective date from January 1, 2013 to January 1, 2015 and establishing new rules for the transition from IAS 39 to IFRS 9. These provisions have been superseded by the amendments of IFRS 9 issued in November 2013 (see previous paragraph). The amendments being discussed here also modify “IFRS 7 - Financial instruments: disclosures”, introducing new comparative disclosures, which will be mandatory or optional depending on the date of transition to IFRS 9. The Group is assessing the potential impact of the future application of the new provisions.
    • “IFRIC 21 - Levies”, issued in May 2013. The interpretation defines when a liability in respect of the obligation to pay a levy (other than income taxes) due to the government, whether local, national or international must be recognized. More specifically, the interpretation established that the liability shall be recognized when the obligating event giving rise to the liability to pay the levy (for example, upon reaching a given threshold level of revenue), as set out in the applicable law, occurs. If the obligating event occurs over a specified period of time, the liability shall be recognized gradually over that period. The interpretation will take effect, subject to endorsement, for periods beginning on or after January 1, 2014. The Group does not expect the future application of the provisions to have an impact.
    • “Amendment to IAS 19 - Defined-benefit plans: employee contributions”, issued in November 2013. The amendments are intended to clarify how to recognize contributions from employees within a defined-benefit plan. More specifically, contributions linked to service should be recognized as a reduction in service cost:
      • over the periods in which employees render their services, if the amount of the contributions is dependent on the number of years of service; or
      • in the period in which the service is rendered, if the amount of the contributions is independent of the number of years of service.
      The amendments will take effect, subject to endorsement, for periods beginning on or after January 1, 2015. The Group is assessing the potential impact of the future application of the measures.
    • “Annual improvements to IFRSs 2010-2012 cycle”, issued in December 2013; the document contains formal modifications and clarifications of existing standards that are not expected to have a significant impact on the Group. More specifically, the following standards were amended:
      • “IFRS 2 - Share-based payment”; the amendment clari162 Enel Annual Report 2013 Consolidated financial statements fies the meaning of “vesting conditions”, defining “performance conditions” and “service conditions” separately. The changes will apply prospectively, subject to endorsement, to share-based payment transactions for which the grant date is on or after July 1, 2014;
      • “IFRS 3 - Business combinations”; the amendment clarifies how to classify any contingent consideration agreed in a business combination. Specifically, the amendment establishes that if the contingent consideration meets the definition of financial instrument it shall be classified as a financial liability or equity. In the former case, the liability shall be measured at fair value and changes in fair value shall be recognized in profit or loss in accordance with IFRS 9. Contingent consideration that does not meet the definition of financial instrument shall be measured at fair value and changes in fair value shall be recognized in profit or loss. The changes will apply prospectively, subject to endorsement, to business combinations for which the acquisition date is on or after July 1, 2014;
      • “IFRS 8 - Operating segments”; the amendment introduces new disclosure requirements. In particular, the disclosures shall include a brief description of how segments have been aggregated and what economic indicators have been assessed in determining that the aggregated operating segments share similar economic characteristics. The changes will apply, subject to endorsement, to annual periods beginning on or after January 1, 2015;
      • “IFRS 13 - Fair value measurement”; the amendment clarifies, within the standard’s Basis for Conclusions, that the IASB does not intend to modify the measurement requirements for short-term receivables and payables;
      • “IAS 16 - Property, plant and equipment”; the amendment clarifies that, when an item of property, plant and equipment is revalued, the gross carrying amount of that asset shall be adjusted in a manner consistent with the revaluation. In addition, it also clarifies that the accumulated depreciation shall be calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking account of accumulated impairment losses. The changes will apply, subject to endorsement, to annual periods beginning on or after January 1, 2015. More specifically, they will be applicable to revaluations recognized in the year ending December 31, 2015 and in the immediately preceding annual period;
      • “IAS 24 - Related party disclosures”; the amendment clarifies that an entity is a related party if that entity, or any member of a group of which it is a part, provides key management personnel services (a so-called management entity). The amendment also introduces disclosure requirements concerning that sort of related party. The changes will apply, subject to endorsement, to annual periods beginning on or after January 1, 2015;
      • “IAS 38 - Intangible assets”; the amendment clarifies that when an intangible asset is revalued, its gross carrying amount shall be adjusted in a manner consistent with the revaluation. In addition, it also clarifies that the accumulated amortization shall be calculated as the difference between the gross carrying amount and the carrying amount of the asset after taking account of accumulated impairment losses. The changes will apply, subject to endorsement, to annual periods beginning on or after January 1, 2015. More specifically, they will be applicable to revaluations recognized in the year ending December 31, 2015 and in the immediately preceding annual period.
    • “Annual improvements to IFRSs 2011-2013 cycle”, issued in December 2013; the document contains formal modifications and clarifications of existing standards that are not expected to have a significant impact on the Group. More specifically, the following standards were amended:
      • “IFRS 3 - Business combinations”; the amendment clarifies that IFRS 3 does not apply in the financial statements of a joint arrangement to the recognition of the formation of every type of joint arrangement (pursuant to IFRS 11). The changes will apply prospectively, subject to endorsement, for annual periods beginning on or after January 1, 2015;
      • “IFRS 13 - Fair value measurement”; the amendment clarifies that the exception provided for in that standard of measuring financial assets and liabilities on the basis of the net exposure of the portfolio shall apply to all contracts within the scope of IAS 39/IFRS 9 even if they do not meet the definitions in IAS 32 of financial assets/ liabilities. The changes will apply, subject to endorsement, for annual periods beginning on or after January 1, 2015. More specifically, they will apply prospectively from the date that the Group initially applies IFRS 13;
      • “IAS 40 - Investment property”; the amendment establishes that a property interest held by a lessee under an operating lease may be classified as an investment property if and only if the property would otherwise meet the definition of an investment property and if the lessee used the fair value model to measure such investments.
        The amendment also clarifies that when an entity acquires an investment property, it must determine whether that acquisition is a business combination under the provisions of IFRS 3. The change regarding property interests held under a lease shall apply retroactively, subject to endorsement, for annual periods beginning on or after January 1, 2015; the amendment concerning the acquisition of an investment property shall apply prospectively, subject to endorsement, to acquisitions made on or after January 1, 2015.