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1. Basis of presentation

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission according to the procedure pursuant to Article 6 of (EC) Regulation No. 1606/2002 of the European Parliament and Council of 19 July 2002 and pursuant to Article 9 of Legislative Decree 38/2005. The IFRS also include the International Accounting Standards (IAS) as well as the interpretation documents currently in force issued by the IFRS Interpretation Committee (IFRS IC), including those previously issued by the International Financial Reporting Interpretations Committee (IFRIC) and, even earlier, by the Standing Interpretations Committee (SIC). For simplicity, all 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 consolidated financial statements as at 31 December 2016, approved by the Board of Directors of Snam S.p.A. at the meeting of 6 March 2017 were subjected to an audit by EY S.p.A. EY S.p.A., as the main auditor, is entirely responsible for the auditing of the Snam Group consolidated financial statements; in the limited cases in which other auditors also take part, it assumes responsibility for the work performed by the latter.

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 applicable from 2016

In the financial year ended 31 December 2016, the Company applied accounting standards in line with those of the previous year, with the exception of the accounting standards and interpretations which came into force in the year starting on 1 January 2016, which are described below.

On 9 January 2015, Commission Regulations (EU) 2015/28 and 2015/29 of 17 December 2014, were published in the Official Journal of the European Union. The Regulations approved, respectively: (i) the regulatory provisions contained in the document “Annual Improvements to International Financial Reporting Standards 2010-2012 Cycle”; and (ii) the amendments to IAS 19 in the provisions in the document “Defined-Benefit Plans: Employee Contributions (Amendments to IAS 19)”.

The provisions contained in the document “Annual Improvements to International Financial Reporting Standards 2010-2012 Cycle” introduced amendments to: (i) IFRS 2, by clarifying the definition of “vesting condition” and adding definitions of service conditions and vesting conditions; (ii) IFRS 3, by clarifying that obligations to pay contingent considerations, other than those defined as equity instruments, are measured at fair value through profit or loss at each reporting date; (iii) IFRS 8, by requiring disclosure of the judgements made by management, describing the segments that have been aggregated and the economic indicators that have been assessed in determining the existence of the economic characteristics that are similar in the aggregated segments; (iv) IAS 16 and IAS 38, by clarifying the way in which the gross carrying amount is calculated when revaluation takes place; and (v) IAS 24, by establishing the information to be provided when a third party that provides key management personnel services to the reporting entity (or the parent company).

The amendments to IAS 19 allow contributions paid by employees or third parties that are independent of the number of years of service to be recognised as a reduction in the current service cost for the period, instead of attributing these contributions across the entire time period in which the service is rendered (i) not related to the number of years of service of the employee (ii) indicated in the formal conditions of the plan (iii) connected to the service performed by the employee.

Through regulation no. 2015/2173, issued by the European Commission on 24 November 2015, the regulatory provisions of the document “Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)”, issued by the IASB on 6 May 2014, were approved. The document governs the accounting treatment for acquisitions of initial or additional interests in joint operations (that do not alter the categorisation of the interest as such), falling within the definition of business pursuant to IFRS 3, which involve the adoption of the provisions for business combination operations applicable to this case.

Commission Regulation (EU) 2015/2231 of 2 December 2015 approved the regulatory provisions contained in the document “Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)”, issued by the IASB on 12 May 2014 with the aim of clarifying that an amortisation method based on revenue generated by the asset (the revenue-based method) is not regarded as appropriate as it exclusively reflects the revenue flows generated by this asset, rather than the way in which the economic benefits incorporated in the asset are consumed. In the case of intangible assets, this presumption may be overcome if: (i) the right to use the asset is related to the achievement of a predetermined revenue threshold to be produced; or (ii) it can be shown that the achievement of revenue and use of the economic benefits generated by the assets are closely correlated.

Commission Regulation (EU) 2015/2343 of 15 December 2015 approved the regulatory provisions contained in the “Annual Improvements to International Financial Reporting Standards 2012-2014 Cycle”, issued by the IASB on 25 September 2014. The document: (i) in relation to IFRS 5, clarifies that any change in the classification of an asset (or disposal group) from held for sale to held for distribution to shareholders (or vice-versa) should be considered as a continuation of the original disposal plan rather than as a new plan; (ii) in relation to IFRS 7 – “Financial Instruments: Disclosures”, provides additional guidance on determining whether there is continued involvement in transferred financial assets, in the case where there is a related servicing contract, in order to establish the level of disclosure required. In relation to the same standard, it also clarifies the applicability of disclosure required on the offsetting of financial assets and liabilities in interim financial statements; (iii) in relation to IAS 19, clarifies that the rate used to discount bonds must be determined using the market yields on leading corporate bonds denominated in the same currency used to pay benefits rather than at country level; and (iv) in relation to IAS 34, clarifies that the information required by IAS 34 on the transactions and significant facts can be provided within the interim financial statements or through other documents, to which the users of the interim financial statements have access in the same conditions and the same time frames as the actual financial statements, otherwise the latter is incomplete.

Through regulation no. 2015/2406, issued by the European Commission on 18 December 2015, the regulatory provisions of the document “Disclosure Initiative (Amendments to IAS 1)”, issued by the IASB on 18 December 2014, were approved. The document includes a number of clarifications relating to materiality, any disaggregation of items, the structure of the explanatory notes, information on the accounting policies used and the presentation of other components of comprehensive income arising from the valuation of equity investments using the equity method.

On the same date, the European Commission issued Regulation (EU) 2015/2441, approving the regulatory provisions contained in the document “Equity Method in Separate Financial Statements” (Amendments to IAS 27, issued by the IASB on 12 August 2014, which permits the recognition in the separate financial statements of investments in subsidiaries, joint ventures and associates using the equity method, as well as at cost or pursuant to IAS 39 (the two methods already permitted). The selected accounting option must be applied consistently for each category of equity investment. The same amendment consequently modified the definition of separate financial statements.

Through regulation no. 2016/1703, issued by the European Commission on 22 September 2016, the regulatory provisions of the document “Investment entities: applying the consolidation exception (Amendments to IRFS 10, IFRS 12 and IAS 28)”, issued by the IASB on 18 December 2014, were approved. The document aims to clarify the cases in which the consolidation exception can be applied for investment entities.

The above changes did not have an impact on the Group’s operations, results, balance sheet and cash flow.

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