ITALY: European Commission asks Italy to modify the accounting rules provided for by the

On July 7, 2004 the European Commission has formally asked Italy to modify Law no. 27 of February 2003 (so-called “Football Saviour Decree”) that
allows sport clubs to write down the value of sportsmen’s contracts over a
longer period of time than their useful economic life. The European
Commission has issued a reasoned opinion, that is the second stage of the infringement procedures provided for by Article 226 of the EC Treaty. If
Italy does not comply with the reasoned opinion within two months, the
Commission may bring the matter before the Court of Justice.

In particular, the European Commission believes that Football Saviour
Decree: i) breaches EC Accounting Directives (78/660/EEC and 83/349/EEC)
that require sportsmen’s contracts to be written down over their useful
economic life, which generally would be the term of validity of those
contracts and; ii) is not in compliance with the principles of true and fair view and of prudence. The effect of the Football Saviour Decree is that sport clubs may have a balance sheet which underestimates the true
costs in a given year and therefore hide real losses, showing to investors
and creditors a misleading financial position.

On the tax treatment of the write down provided for by the Football Saviour
Decree, which was held by the European Commission to constitute a State
Aid, the Italian Government and the Commission reached an agreement on
March (see our website news of December 15, 2003 and its March updating).