Italy energy firms banned from passing on new tax

ROME, June 25 (Reuters) - The Italian government has banned energy firms from passing on a new tax to their customers, the text of the law showed on Wednesday.

Economy Minister Giulio Tremonti has dubbed his hiking of the main tax on company profits (IRES) to 33 percent from 27.5 percent as a "Robin Hood" tax as the extra revenues will be taken from wealthy companies and spent on the needy.

Energy companies initially protested but have since played down the impact of the tax. Fulvio Conti, chief executive of power utility Enel (ENEI.MI: Quote, Profile, Research) said the tax would be "easily absorbed" by his group.

Media had speculated that the tax on oil, gas and electricity companies, would mean an extra burden to consumers already facing higher costs due to rising oil prices.

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New accounting norms to hit dole-happy cos

Companies giving stock options to their employees to retain them are expected to see a drop in their profits as they adopt international accounting standards.

The International Financial Reporting Standards (IFRS) that companies have to adopt from April 2010 require them to value the cost of employee stock options as per their fair value and charge for it over the service period. That is, if the share price moves above the price at which the employee is given a right to purchase, then the option value, multiplied by the number of shares, has to be shown in the company’s profit-and-loss account as a cost, explained PricewaterhouseCoopers partner Sunder Iyer. This has the potential to reduce the company’s profitability and earnings per share significantly, accounting experts said.

Companies now have the option to value their Esops as per their fair value, but most of them do not do that since they have the option not to. But once the IFRS becomes mandatory, they lose this option.

Although the right to purchase the share was given at a price close to the market price on that date, they did appreciate over a period of time. This appreciation has made the employee stay with the company. Although the company has not given any discount on the date when the employee has exercised the option, he did benefit from its appreciation.
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ICAI for early adoption of new accounting norms

NEW DELHI: The country's accounting regulator, Institute of Chartered Accountants of India (ICAI), clarified on Monday that its announcement on derivative accounting was to ensure that companies report their estimated losses from foreign currency derivatives as per already existing norms. The regulator said it has not advanced the compliance date for the new accounting norms on financial instruments, although it would encourage early adoption. ICAI said that it has no problem if other regulators-SEBI or RBI-want an early implementation.

Adopting the new standard on financial instruments-AS 30-would allow companies to provide for future gains as well as losses on foreign currency derivatives as per their fair market value, while following the existing norm of accounting prudence-AS 1-will force them to provide for only losses and not gains. That is if they do not adopt the new standards, they will not have the flexibility to provide for future gains. Therefore, net profit may be lower. Corporate houses are expected to make their balance sheets this way even now, but many had doubts after ICAI recently brought in AS 30.

ICAI officials told reporters on Monday that it received queries from various quarters on whether corporate houses need to disclose their exposure to derivative instruments now since the accounting standard covering them need to be compulsorily followed only three years from now.
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