Recently issued accounting standards

Accounting standards, amendments and interpretations issued by the IASB/IFRIC applicable as of 1 January 2009

In regulation no. 2009/1171/EC of 30 November 2009, the European Commission endorsed amendments to IFRIC 9 “Revaluation of embedded derivatives” and to IAS 39 “Financial instruments: recognition and measurement” which clarify the accounting treatment of embedded derivatives by entities making use of reclassification criteria issued by the board in 2008. Companies are applying the amendments to IFRIC 9 and IAS 39 as of 1 January 2009. These provisions are currently not being applied by the Group.

In regulation no. 2009/1165/EC, issued on 27 November 2009, the European Commission endorsed amendments to IFRS 7 “Financial instruments – additional information” and IFRS 4 “Insurance contracts”. The interpretation adds to the disclosures to be provided in financial statements with respect to: (i) the fair value measurement of financial instruments and (ii) liquidity risk. The amendments made to the provisions of IFRS 7 and IFRS 4 are effective as of 1 January 2009. The amendments to IFRS 4 do not apply to the Group.

In regulation no. 2009/824/EC of 9 September 2009, the European Commission endorsed amendments to IAS 39 “Financial instruments – Reclassification of financial assets – Effective date and transitory provisions,” which set out the rules for reclassification of financial assets. These provisions are currently not being applied to the Group.

In regulation no. 70/2009/EC dated 23 January 2009, the European Commission endorsed the document “Improvements to International Financial Reporting Standards” set out by the IASB as part of the annual process “Improvements to IFRS” relative to amendments, essentially of a technical and reporting nature, to existing international accounting standards. The provisions of the regulation are effective as of 1 January 2009 (except for the amendments to IFRS 5 and IFRS 1, which will be applicable as of 1 January 2010).

In regulation no. 69/2009 dated 23 January 2009, the European Commission endorsed the amendment to IFRS 1 “First time adoption of IFRS” and to IAS 27 “Consolidated and separate financial statements – Cost of an investment in a subsidiary, jointly controlled entity or associate”. The amendment provides that for first time adoption of IFRS in separate financial statements, an entity may adopt the deemed cost option to determine the cost of an investment in a subsidiary, associate or joint venture. This interpretation is applicable as of 1 January 2009.

In regulation no. 53/2009/EC of 21 January 2009, the European Commission endorsed the amendment to IAS 32 “Financial instruments – disclosure and presentation” and IAS 1 “Presentation of the financial statement”. The amendments require that some instruments issued by companies and currently classified as liabilities even though they have characteristics similar to ordinary shares be classified as capital. This interpretation is applicable as of 1 January 2009. These provisions do not currently apply to the Group.

Regulation no. 1274/2008 issued by the European Commission on 17 December 2008, endorsed the updated version of IAS 1 “Presentation of financial statements,” which introduces, among other things, the obligation to present a statement of comprehensive profit including the economic result made up of income and expenses that as expressly stipulated in the IFRS provisions are recognised directly under shareholders’ equity. The provisions of the new version of IAS 1 are effective as of 1 January 2009. The effects of such changes are shown in the financial statement forms.

Accounting standards, amendments and interpretations issued by IASB/IFRIC applicable as of 1 January 2010

In regulation no. 1164/2009/EC of 27 November 2009, the European Commission endorsed interpretation IFRIC 18 “Transfer of assets from customers”. The interpretation sets out the methods for recognition and measurement of plant, property and equipment (financial assets) transferred (received for construction or acquisition of instrumental assets), to be utilised in exchange for the provision of services, generally in public utility sectors. The new standards are applicable as of 1 January 2010. The adoption of this interpretation has not had material accounting effects for the Group.

In regulation no. 1142/2009 of 26 November 2009, the European Commission endorsed interpretation IFRIC 17 “Distribution of non-cash assets to owners.” The interpretation sets out the methods for recognition and measurement of dividends made up of non-cash assets and is applicable as of 1 January 2010. This interpretation currently does not apply to the Group.

In regulation no. 2009/839/EC of 15 September 2009, the European Commission endorsed amendments to IAS 39 “Financial instruments – Eligible hedged elements,” setting out eligible hedged elements. The amendments to IAS 39 are applicable as of the start date of the first financial year beginning after 30 June 2009 (for Snam Rete Gas, 1 January 2010). This provision is currently not being applied to the Group.

In regulation no. 636/2009 dated 22 July 2009, the European Commission endorsed interpretation IFRIC 15 “Agreements for the construction of real estate”. The interpretation applies to the accounting of revenue from the sale of real estate and specifically for agreements made before the construction work is completed, whether the revenue must be recognised pursuant to IAS 11 “Construction contracts” or IAS 18 “Revenue”. This interpretation is applicable as of 1 January 2010. This interpretation currently does not apply to the Group.

In regulation no. 460/2009, the European Commission endorsed IFRIC 16 “Hedges of a net investment in a foreign operation”, which clarifies the criteria for recognition and measurement of hedges of net investments in foreign operations. Specifically, the interpretation stipulates, among other things, that hedge accounting may be applied only to the foreign exchange difference between the parent’s functional currency and that of its foreign operation and that the hedge may be held by any company in the group, except the hedged foreign operation. The provisions of IFRIC 16 are effective as of 1 January 2010. These provisions do not apply currently to the Group.

Regulations nos. 494/2009/EC and 495/2009/EC, dated 3 June 2009, endorsed amendments to IFRS 3 “Business combinations” and IAS 27 “Consolidated and separate financial statements”. Among other things, the new provisions of IFRS 3 allow for charging accessory costs to a business combination to the income statement, recognising changes to contingent consideration on the income statement, and the option of recognising the entire amount of goodwill deriving from the transaction, therefore also considering the share attributable to minority interests (i.e. full goodwill method). The new provisions also modify the current criterion of recognition of acquisitions in later phases, allowing for posting on the income statement the difference between fair value on the date of acquisition of control of previously held net assets and the respective carrying amount. The new version of IAS 27 stipulates, among other things, that the effects deriving from the acquisition (transfer) of equity investments held after control is acquired (without loss of control) are to be recognised under shareholders’ equity. In addition, the new provisions stipulate that for transfer of part of the equity investments held with resulting loss of control, the investment kept is to be adjusted to the respective fair value with the revaluation to be included under the capital gain (capital loss) on the transfer transaction. The provisions of the new versions of IFRS 3 and IAS 27 are applicable as of financial years starting on or after 1 July 2009 (for Snam Rete Gas: 2010 financial statements).

In regulation no. 254/2009 of 25 March 2009, the European Commission endorsed interpretation IFRIC 12 “Service concession arrangements”, which sets out the recognition and measurement criteria to be adopted for arrangements between the public and private sectors for the development, financing, management and maintenance of infrastructure under concessions. Specifically, in cases in which the grantor controls the infrastructure, governing/ controlling the characteristics of the services provided, the applicable prices and maintaining a residual interest in the activity, the concession holder’s accounting must treat its own interest in the infrastructure either as a right of use of that infrastructure or as a financial asset or as a combination of both depending on the characteristics of the arrangements governing the concession contract. Following the issuance of that interpretation, concession holders who prepare financial statements according to international accounting standards and which fall under the case described above, may not treat assets dedicated to the provision of the service as plant, property and equipment on the balance sheet, regardless of whether they have ownership to them. The provisions of IFRIC 12 are effective as of 1 January 2010.

The application of this interpretation will have the following accounting effects for the Group: (i) on the balance sheet, due to the recognition of the right of use of the infrastructures under concession, reclassification of the net carrying amount of the assets posted on the financial statement as at 31 December 2009, under “Property, plant and equipment,” from tangible to intangible assets; (ii) no material effect on the income statement, since the current regulatory and tariff framework does not allow for reliable identification of the margin paid to the operator for infrastructure construction and enhancement and therefore for itemised representation of the margin for management activity.

Accounting standards, amendments and interpretations issued by the IASB/IFRIC applicable as of 1 January 2011

Regulation no. 1293/2009 issued by the European Commission on 23 December 2009 endorsed the amendment of IAS 32 “Classification of rights issues,” which clarifies classification on the financial statement of the issuer of instruments granting shareholders the right to acquire issuer equity instruments at a price denominated in a currency other than the issuer’s functional currency. These instruments, if offered proportionately to all shareholders for a fixed cash amount, are classified as equity instruments, even if the strike price is denominated in a currency other than the issuer’s functional currency.

The amendment of IAS 32 is applicable as of 1 January 2011. These provisions are currently not applied by the Group.

Accounting standards and interpretations issued by the IASB/IFRIC and not endorsed by the European Commission

On 4 November 2009, the IASB issued the new version of IAS 24 “Related Party Disclosures”, which: (i) adds to the definition of related parties adding new instances; (ii) for transactions between government-related entities, allows for limiting quantitative information to relevant transactions. The provisions of the new version of IAS 24 are effective as of financial years starting on or after 1 January 2011.

On 12 November 2009, the IASB issued IFRS 9 “Financial Instruments,” which amends the criteria for recognition and measurement of financial assets and their respective classification on financial statements. Specifically, the new provisions stipulate, among other things, a model of classification and measurement of financial assets based solely on the following categories: (i) assets valued at amortised cost; (ii) assets valued at fair value. The new provisions also foresee that investments other than in subsidiaries, jointly controlled entities or associates are to be valued at fair value posting the effects on the income statement. If such investments are not held for trading purposes, changes in fair value are allowed to be recognised on the statement of comprehensive income, maintaining on the income statement only the effects associated with dividend distributions. Upon transfer of the investment, posting on the income statement of the amounts recognised on the statement of comprehensive income is not provided. The provisions of IFRS 9 are effective as of financial years starting on or after 1 January 2013.

On 26 November 2009, the IFRIC issued interpretation IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”, which sets out the accounting treatment to be adopted for the extinguishment of a financial liability with the issuance of equity instruments (i.e. debt for equity swap).

Equity instruments issued to extinguish liabilities in whole or in part are valued at their fair value or, if not reliably determinable, at the fair value of the extinguished liability. The difference between the carrying amount of the extinguished financial liability and the fair value of the equity instruments issued is to be recognised on the income statement. The provisions of IFRIC 19 are effective as of financial years starting on or after 1 July 2010 (for Snam Rete Gas, 2011 financial statements).

On 16 April 2009, the IASB issued the document “Improvements to IFRSs” containing essentially technical and editorial changes to the international accounting standards and existing interpretations. The provisions of the document are effective as of 2010.

Currently, Snam Rete Gas is analysing the above standards and interpretations and evaluating whether their adoption will have a material effect on the financial statements.