Financial disclosure process

Financial reporting plays a pivotal role in establishing and consolidating solid and constructive relationships between companies and the parties they interact with, contributing, together with positive business performances to the creation of value for shareholders. Edison, being aware of the significance of financial reporting, developed an internal control system aimed at ensuring the credibility, accuracy, reliability and timeliness of financial information, with respect both to internal entities and the market.

In order to foster efficient coordination and exchange of information between the Parent Company and the subsidiaries and ensure the correct construction of the separate and consolidated financial statements, the Group adopted, and constantly updates an adequate set of rules and documents. Specifically, this set of rules includes the Group’s accounting principles, administrative and accounting procedures, guidelines, the fast closing procedure, operating instructions, accounting manuals and chart of accounts.

In this regard, because Edison is an Italian company with savings shares traded on an Italian regulated market, it is required to appoint a Corporate Accounting Documents Officer (the “Documents Officer”), who, pursuant to law, has specific attributions, responsibilities and certification and declaration obligations. Pursuant to the Bylaws, the Documents Officer must be selected by the Board of Directors, upon a mandatorily required opinion by the Board of Statutory Auditors, among executives with proven multi-year experience in the fields of administration, finance and/or control at companies listed on regulated markets. On October 26, 2012, the Board of Directors decided to entrust this assignment jointly to Roberto Buccelli, in his capacity as Accounting & Tax manager, and Didier Calvez, in his capacity as Chief Financial Officer. The Board of Statutory Auditors expressed a favorable opinion with regard to these appointments. The Chief Executive Officer, being duly authorized by the Board of Directors, provided each one of the abovementioned parties with all necessary operating authority. The respective compensation packages were defined consistent with the compensation policies for Group managers, taking into account the general guidelines reviewed by the Compensation Committee. More specifically, the incentive mechanisms for these managers are consistent with the tasks entrusted to them.

In accordance with statutory requirements, the Documents Officer is responsible for the internal control system insofar as it applies to financial reporting. Consequently, prepares the administrative and accounting procedures needed for periodic financial reporting and any other financial communication relevant for that purpose, and, in a special report on the statutory financial statements, the semiannual financial statements and the consolidated financial statements, certifies, together with the Chief Executive Officer, that the abovementioned procedures were adequate and were effectively applied during the period covered by the accounting documents.

It is important to note that the model required by ex Law No. 262/2005 (the “262 Model”) defines the guidelines that must be applied within the Edison Group to satisfy the obligations set forth in Article 154-bis of the TUF with regard to the preparation of corporate accounting documents and comply with the resulting certification requirements.

The 262 Model, through its own “Accounting Model Regulations,” accomplishes the following:

  • It defines the roles and responsibilities of the Organizational Units involved for various reasons. Specifically, the Administrative Processes Function of the Accounting and Tax Department is responsible for deploying and concretely implementing, through the Internal Control Officer, the activities needed to guarantee the effectiveness of the accounting control system.
  • It sets forth the operating methods that should be used to carry out the activities to comply with the abovementioned statutory requirements;
  • It provides support to the Documents Officer and the Chief Executive Officer in the issuance of the attestations and declarations required pursuant to law by requiring that the managers of the Company’s Operating Units who are responsible for implementing the 262 Model use the internal communication process to provide an internal attestation of the completeness of the information and that the accounting control system established pursuant to Law No. 262/2005 is functioning effectively;
  • It assigns responsibility for testing activities to the Internal Auditing Department;
  • To effectively implement the programs described above, it identified specific managers of Divisions/Departments/Business Units/Functions and specific operational officials who serve as “focal points.”

More specifically, the internal accounting control system outlined in the 262 Model rests on the following characterizing elements:

  • A corpus of corporate procedures governing the preparation and disclosure of financial information including, but not limited to, the Group Accounting Manual, a procedure for the preparation of period reports called “fast-closing” procedure (inspired by best international practices, which is updated monthly and defines in detail the roles and responsibilities of company Divisions/Departments, the support systems, the reporting details and the process deadlines), operating financial statement instructions, reporting procedures, accounting calendars, etc.
  • A process carried out under the supervision of the Documents Officer and in concert with the Chief Executive Officer to map the main risks related to accounting information and the key controls to monitor the identified risks (administrative/accounting risk assessment). The risk assessment process is performed every six months.
  • For each relevant area/accounting information, the establishment of accounting processes and flows that are deemed critical and specific control activities through the development of special control matrices that describe for each process (or accounting flow) that has been identified as critical and/or sensitive the standard control activities (key controls) and the relevant operating unit officers responsible for implementing the 262 accounting control Model. This activity is reviewed on a quarterly basis.
  • Designation of a specific company function, identified as the Administrative Processes Function of the Accounting and Tax Department, responsible for reviewing and updating on a regular basis the corpus of Group accounting procedures and providing support to the organizational units in updating the operating rules for the benefit of the 262 Model.
  • A process involving activities to assess periodically the adequacy and actual implementation of the 262 Model and the identified key controls. This assessment, which is performed every six months, is structured on two levels: a) self-assessment by the organizational units, carried out by each organizational unit officer with regard to the processes/flows under his jurisdiction; b) independent assessment performed by the Internal Auditing Department. The audit plan is reviewed by the Control and Risk Committee and approved by the Board of Directors.
  • A process of documentation and internal communication, carried out by managers of divisions/departments/business units/corporate functions and by the Chief Executive Officers and managers of the Planning, Accounting and Control Departments of the companies that do not fall within purview of Edison’s oversight and control, showing the effectiveness of the controls and the results of the assessments performed.
  • Lastly, a formal certification process for recipients outside the Group.

The 262 Model was again updated and upgraded in 2014. More specifically, the at-risk areas were reassessed in light of changes in the Group’s organization and the industrial context, with the aim of increasing the level of protection, specifically with regard to the more sensitive and significant areas.

On April 1, 2016, Fenice Spa was included in the scope of consolidation of the Edison Group. Consequently, an analysis of processes and risks for the purposes of Law No. 262/2005 was performed, introducing a specific matrix that governs the closing process, with the issuance of respective attestation by the Chief Financial Officer.