The new false accounting and the “dilemma of estimates”

When it comes to identifying the offence of false corporate communications, despite any suggestion to the contrary contained in the new provisions introduced by Law n. 69/2015, accounting estimates included in financial statements do matter. The Fifth Section of the Italian Supreme Court has so ruled by decision n. 890/2016, the reasons of which were filed on 12 January 2016.

Such decision is in sharp contrast to decision n. 33774 (“Crespi” case) filed on 30 July 2015, by which the same judges of the aforesaid Court, in addressing the same issue of whether or not the so-called “falso valutativo” is punishable, offered a different interpretation and seemed more inclined to drastically narrow the scope of application of the offence by deeming estimates no longer punishable.

The new decision emphasizes a specific point: accounting estimates may be criminally relevant when they are in breach of the criteria set out by civil law, EU directives, EU regulations, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS).

Assuming that “in financial statements what matters is the datum resulting from the judgement/valuation made on a particular item and its consequent formulation in figures rather than the item itself” the judges have set out the principle according to which, since financial statements consist mainly of estimates and evaluations “there is no doubt that the concept “reporting material and significant items” should include also, and especially, accounting estimates”. In a word, the judges have come to the conclusion that «any failure to comply with the parameters set out by the law entails a misstatement, i.e., something that, pursuant to the new art. 2621 of the Italian Civil Code, continues to be punishable notwithstanding the cancellation of the useless “even if subject to evaluation» sentence.

The Italian Supreme Court has given also another reason in support of such “stricter” interpretation: the inclusion in anti-corruption legislation of the new false corporate communications (Law 69/2015 laying down provisions on offences against the public administration, mafia-type associations and false accounting). Far from being a “casual” choice, this is rather “an eloquent proof that the lawmaker has eventually acknowledged, on the basis of the data derived from experience, that false accounting is a recurring signal of certain instances of corruption which often consist of entering false invoices aimed at setting aside slush funds for paying kickbacks or carrying out other unlawful activities”. According to the Court, if the liability to punishment for misstatements is excluded, “the purpose of the law, which is to pursue any unlawful activity intentionally aimed at fuelling or concealing corruption, would be frustrated”.

Only a few weeks later however, the judges of the Italian Supreme Court have once again given their favourable opinion on the fact that estimates are not punishable, and, in fact, by decision n. 6916 filed on 22 February 2016, the Fifth Section of such Court, in line with the conclusions reached by the same Section in decision n. 33774 (“Crespi” case) dated 30 July 2015, interpreting the changes made to the law, held that the textual datum, as well as the comparison with how articles 2621 and 2622 of the Italian Civil Code were previously formulated, “are elements that are indicative of the actual intention of the law to remove the liability to punishment for false representations.

In light of the foregoing, prompt intervention by the Italian Supreme Court sitting as a unified bench which should clarify the issue, would not only be desirable but necessary to prevent any useless and unacceptable difference of treatment, or incorrect application of the law on false corporate communications.

Leave a Reply