1 Basis of presentation

The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission pursuant to the procedure under Article 6 of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 and to Article 9 of Legislative Decree 38/2005. The IFRS also include the interpretative documents issued by the International Financial Reporting Standard Interpretations Committee (IFRIC), as well as the International Accounting Standards (IAS) and the interpretations of the Standard Interpretations Committee (SIC) currently in force. For simplicity, all of the aforementioned standards and interpretations will hereafter be referred to as “IFRS” or “International Accounting Standards”.

The consolidated financial statements are prepared in consideration of future continuing business using the historical cost method, taking into account value adjustments where appropriate, with the exception of the items which, according to IFRS, must be measured at fair value, as described in the measurement criteria.

The financial statements at 31 December 2014, approved by the Board of Directors of Snam S.p.A. at its meeting of 11 March 2015, implemented at its meeting of 3 April 2015 the changes to the financial statements following the notification by CDP of its requirement, pursuant to international accounting standard IFRS 10 “Consolidated Financial Statements”, to fully consolidate Snam S.p.A. as of the financial statements as at 31 December 2014. The financial statements have undergone an audit by Reconta Ernst & Young S.p.A. As the main auditor, Reconta Ernst & Young is entirely responsible for auditing the Group’s consolidated financial statements. In the limited cases in which other auditors are involved, it assumes responsibility for the work that they carry out.

The consolidated financial statements are presented in euro. Given their size, amounts in the financial statements and respective notes are expressed in millions of euros, unless otherwise specified.

Accounting standards and interpretations applied as of the current year

In the financial year ended 31 December 2014, the Company applied accounting standards in line with those of the previous year, with the exception of the accounting standards and interpretations adopted by the Group as of 1 January 2014, which are described below.

European Commission Regulation No. 1254/2012 of 11 December 2012 officially endorsed IFRS 10 – “Consolidated Financial Statements”, IFRS 11 – “Joint Arrangements” and IFRS 12 – “Disclosures of Interests in Other Entities”, as well as revised versions of IAS 27 – “Separate Financial Statements” and IAS 28 – “Investments in Associates and Joint Ventures”.

IFRS 10 – “Consolidated Financial Statements” (hereinafter “IFRS 10”) and the revised version of IAS 27 – “Separate Financial Statements” (hereinafter “IAS 27”) set out, respectively, the principles to be adopted for the presentation and preparation of consolidated and separate financial statements. IFRS 10 provides, inter alia, a new definition of control to be applied uniformly to all companies (including special purpose vehicles). According to this definition, a company controls an investee when it is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The standard lists the factors to be considered when assessing whether control exists, which include, inter alia, potential rights, protective rights, and whether there are agency or franchising agreements in place. The new provisions also recognise the possibility of exercising control over an investee even without holding the majority of voting rights due to a fragmented ownership structure or the passive attitude of other investors.

Based on the investors’ rights and obligations, IFRS 11 – “Joint Arrangements” (hereinafter “IFRS 11”) identifies two types of joint arrangements (joint operations and joint ventures), establishes the criteria for identifying joint control and governs the subsequent accounting treatment to be adopted for recognition purposes. For the recognition of joint ventures in consolidated financial statements, the new provisions indicate the equity method as the only permitted treatment, removing the possibility of using proportional consolidation.

The updated version of IAS 28 – “Investments in Associates and Joint Ventures” (hereinafter “IAS 28”) defines, inter alia, the accounting treatment to be adopted in the event of the total or partial divestment of an equity investment in an associate or joint venture.

IFRS 12 – “Disclosures of Interests in Other Entities” (hereinafter “IFRS 12”) specifies the disclosure requirements for consolidated financial statements relating to subsidiaries and associates, joint ventures and joint operations, and unconsolidated structured entities, specifically requiring explanation of the significant assumptions made (and any changes thereto) for the purposes of determining control or joint control, as well as the assessments and significant assumptions made to determine whether or not cases of joint control should be classed as a joint venture or a joint operation.

European Commission Regulation No. 1256/2012 of 13 December 2012 officially endorsed the provisions of the document “Amendments to IAS 32. Financial instruments: recognition in the financial statements – Offsetting financial assets and liabilities”, which clarifies the application of certain criteria present in IAS 32 for offsetting financial assets and liabilities. Specifically, the amendment clarifies that there is a legal right to offset subject to the following conditions: (i) the right to offset must be currently exercisable, and therefore may not be dependent on a future event; and (ii) the right to offset must be legally exercisable by all counterparties, both in the ordinary course of business and in the event of the insolvency of one of the counterparties.

European Commission Regulation No. 313/2013 of 4 April 2013 officially endorsed the amendments set out in the document “Guide to transitional provisions (amendments to IFRS 10, IFRS 11 and IFRS 12)”, which provides some clarifications and simplifications with regard to the transition requirements for IFRS 10, IFRS 11 and IFRS 12. Specifically, the document clarified that the date of first application of the aforementioned three standards is the first day of the administrative period in which IFRS 10 was adopted for the first time. Entities that adopt IFRS 10 must assess control as at the date of first application; the treatment of comparative figures will depend on that assessment.

European Commission Regulation No. 1174/2013 of 20 November 2013 officially endorsed the amendments set out in the document “Investment entities (amendments to IFRS 10, IFRS 12 and IAS 27)”, which provides clarifications on the definition of the scope of consolidation for companies classed as investment entities, defined as entities that obtain funds from one or more investors in order to provide them with investment management services and that undertake, in relation to their investors, to pursue the commercial objective of investing the funds exclusively with a view to obtaining returns from capital appreciation, investment income, or both. The amendment introduced an exemption for investment entities from the obligation to consolidate subsidiaries, unless the subsidiaries in question provide services connected with investment activities.

European Commission Regulation No. 1374/2013 of 19 December 2013 officially endorsed the amendments set out in the document “Amendments to IAS 36 – Additional information on the recoverable value of non-financial assets”. The amendment concerns disclosure of the recoverable value of assets that have been impaired, where the recoverable value is based on the fair value less selling costs.

European Commission Regulation No. 1375/2013 of 19 December 2013 officially endorsed the amendments set out in the document “Amendments to IAS 39 – Novation of derivatives and continuation of hedge accounting”. The amendment introduced an exception to the requirements for terminating hedge accounting in cases of novation of OTC derivatives with a central counterparty. Specifically, the amendment stipulated that it is not necessary to interrupt the hedge accounting of a “renewed or modified” derivative that had been designated as a hedging instrument if the following conditions are met: (i) if, as a result of laws and regulations, the parties to a hedging instrument agree that a central counterparty is the new OTC counterparty; (ii) if, as a result of laws and regulations, one or more counterparties replace the original counterparty to become their new counterparty; (iii) if any other changes to the hedging instrument are limited to those necessary to carry out this counterparty replacement. The changes introduced by the amendment therefore clarify that it is possible to continue the accounting of hedges consisting of “renewed” derivatives when the replacement or carrying forward of the derivative with another hedging instrument is not a conclusion or termination of the previous instrument.

Commission Regulation (EU) No. 634/2014 of 13 June 2014 officially endorsed the interpretation “IFRIC 21 – Taxes”, which defines the accounting treatment of payments requested by government authorities, other than income taxes, fines and penalties arising from breaches of the law. IFRIC 21 indicates the criteria for recognising a liability, establishing that the obligating event for the recognition of the liability is the activity that triggers the payment of the levy in accordance with the relevant legislation. For entities belonging to EU countries, the interpretation must be applied “at the latest” as of financial years starting on or after 17 June 2014 (therefore, as of 1 January 2015 for financial years that coincide with the calendar year). Early application is permitted.

The application of these accounting standards and the adoption of the amendments to existing standards had no effect on the consolidated financial statements at 31 December 2014. With regard to IFRS 11, in view of the analysis performed on Snam’s joint arrangements, these arrangements are classed as joint ventures. Therefore, Snam’s related investments continue to be measured at equity.