TRUTHFULNESS OR TRIB-TRUTHFULNESS OF FINANCIAL STATEMENTS? A Historical Analysis I. Financial reporting and tax regulations from 1861 to 1960 in Italy

Financial reporting is a complex document with twofold purpose: to be a business management tool and to represent the communication element par excellence towards the company’s external community. Financial reporting, interpreted as a business management tool, is not subject to any regulations, and the company can draw up this document according to the criteria it deems most correct. This is true from both a formal and a substantive point of view. However, from a substantive point of view, if financial reporting is true and correct, it is not clear how internal financial reporting could be different from financial reporting that must file with the Chamber of Commerce to become a public document. The form, on the other hand, i.e. the classification structure of the financial statements, if such a document is internal, is free. Each company may opt for the reclassification it deems most consistent with its overall situation and organisation. This text will focus only on public financial reporting, i.e. the document intended for third parties external to the company. This document has undergone considerable changes over time concerning the items’ substance and the form of the financial statement structure. In the first and second volumes of this trilogy of textbooks, we will analyse the historical legislative evolution of financial reporting. This analysis will, however, be complemented by the simultaneous in-depth examination of tax legislation concerning corporate income taxation and its connection to financial reporting results. Here, too, attention will be focused not so much on the individual tax regulations that have followed one another over time but on the interrelationships that can be identified between these regulations and the content of financial reporting regulated first by the commercial code and then by the civil code. As we shall subsequently highlight, there are companies subject to IAS/IFRS, which we shall discuss in the following pages. The analysis in these texts will, however,focus mainly on the financial statements governed by the civil code and the tax legislation relating to companies that must prepare their financial reports following the civil code. The main objective of the trilogy of texts is to identify what kind of relationship has existed and still exists between civil law and tax law. In addition, the pragmatic behaviour of the financial reporter will be analysed, since, as will be shown in the third volume, the attitude of the financia reporter does not always follow the normative dictate of civil law and tax law. The theoretical analysis of the interrelationships between civil and tax law financial reporting will therefore be completed by an in-depth examination of the operational behaviour of those who draw up the balance sheet, the profit and loss, the notes to the accounts and the cash flow statement. In the third volume, in which the results of 25 years of research into the relationship between financial reporting and tax law will be presented, it will note that the pragmatic behaviour of financial reporting practitioners often does not reflect the dictates of statutory and tax law. In the first two volumes of this trilogy, however, the historical evolution of the relationship between financial reporting and tax law will be analysed up to the present day, where, if one had the will, one could comply with the tax law and apply the civil law, even if this might mean losing a tax benefi that very few wish to lose. The following pages will analyse these issues from a theoretical and operational point of view. The analysis will begin by considering the financia reporting t relationship period at the end of the 1800s. The second volume, it will end with the current regulations regarding this relationship.