Notes to consolidated financial statements
Following the operation of separating the natural gas business in Italy from Snam, which led to the transfer, with effect from 7 November 2016, of the entire equity investment held by Snam S.p.A. in Italgas Reti S.p.A. (formerly Italgas S.p.A.) to Italgas S.p.A. (formerly ITG Holding S.p.A.)1, in the 2016 consolidated financial statements the natural gas distribution business segment is represented as a “Discontinued operation” based on the provisions of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” 2.
Based on these provisions, the economic results of the natural gas distribution sector for the period 1 January – 6 November 2016 are reported separately in a single line of the income statement3 and limited to relations with third parties, with inter-company transaction eliminations continuing to be conducted until the effective date of the transactions, a date until which Italgas and its subsidiaries were entities controlled by Snam and, consequently, included in the scope of consolidation. The financial years used for comparison were reclassified in a consistent manner.
In this representation method, if there are significant transactions between the discontinued operations (distribution activity) and the continuing operations, the results of the continuing operations, (transportation, regasification, storage, as well as corporate activities) do not represent the performance as if there were standalone activities by way of the elimination of inter-company transactions. Specifically, revenue for the provision of services and financial income, respectively, with regard to services rendered and loans supplied centrally by Snam S.p.A. to Italgas Reti S.p.A., are subject to elimination, with the costs that generated these chargebacks remaining under continuing operations.
As laid down by the provisions of IFRS 10 “Consolidated financial statements”, assets and liabilities attributable to the natural gas distribution sector were eliminated from the Group Consolidated statement of financial position at the date of the loss of control against the corresponding portion of shareholders’ equity4.
The economic information on the cash flows of discontinued operations is given in Note 21 “Discontinued operations”.
For the sake of completeness, note that the operation of separating the natural gas distribution business from Snam qualifies as a “Business combination involving entities under common control” and, as such, is excluded from the scope of application of IFRS 3 “Business combinations” and IFRIC 17 “Distribution to shareholders of assets not represented by cash”. Specifically, there is the situation in which the companies participating in the business consolidation are ultimately controlled, pursuant to IFRS 10, by the same party, i.e. by CDP, both before and after the combination and such control is not transitory. As a result, for the purpose of the Snam Group consolidated financial statements, the transaction in its entirety was recorded applying the principle of continuity of values.
1 To complete this operation, which spans several stages that are unitary and simultaneous, Snam S.p.A. has a significant interest in Italgas S.p.A. owning a 13.5% stake in the company’s share capital. The operation is illustrated in detail in Note 21 ”Discontinued operations”.
2 The evaluation criteria in accordance with the provisions of IFRS 5 are illustrated in Note 3, “Evaluation criteria – Non-current assets held for sale and discontinued operations”.
3 These results also include the contribution to the income statement of Italgas S.p.A. because the company, controlled by Snam until the effective date of the transaction, was established, on 1 June 2016, exclusively under the scope of the operation in question as the future beneficiary holding company of the transfer of the entire equity investment of Snam S.p.A. in Italgas Reti S.p.A.
4 With reference to the tables of the change in amounts on the balance sheet reported in the later notes, in order to allow the reconciliation between the mandatory income statement items and those in the above tables, the effects relating to discontinued operations for 2016 and for 2015 were presented separately.