The “tax-true and fiscally-fair” principle in Italian financial reporting

The “true and fair view” principle is a basic notion for all financial reports. Compliance with this principle is extremely important because only a true and fair view can ensure that the financial statement prepared is correct and legitimate. An empirical research I conducted in Italy have shown that Italian financial statements are “contaminated” by regulations that differ from accounting standards. In fact, many Italian financial statements are not prepared according to national and/or international accounting standards, but rather based on tax laws. The objective of the empirical research was to verify whether the Italian financial reports are prepared on the basis of the principle of true and fair view or are influenced by tax rules which have nothing to do with the values that should be observed in financial reporting. This transforms the “true and fair view” into a “tax-true and fiscally-fair view”, a condition that prevents a financial statement from being possibly considered as correct and legitimate from a legal and financial point of view.

The "true and fair view" principle is a basic notion for all financial reports. Compliance with this principle is extremely important because only a true and fair view can ensure that the financial statement prepared is correct and legitimate. An empirical research I conducted in Italy has shown that Italian financial statements are "contaminated" by regulations that differ from accounting standards. In fact, many Italian financial statements are not prepared according to national and/or international accounting standards, but rather based on tax laws. The objective of the empirical research was to verify whether the Italian financial reports are prepared on the basis of the principle of true and fair view or are influenced by tax rules which have nothing to do with the values that should be observed in financial reporting. This transforms the "true and fair view" into a "tax-true and fiscally-fair view", a condition that prevents a financial statement from being possibly considered as correct and legitimate from a legal and financial point of view.