The Strange Case of Inventories In Italy.
For The Tax Authorities, The Final Inventories of One Year Are The Opening Inventories of The Following Year. Still, The Opening Inventories of One Year Are Not The Final Inventories of The Previous Year.
Maria Silvia Avi
Full Professor in Business Administration Management Department- Ca’Foscari Venezia S. Giobbe – Cannaregio 873- 30121 Venezia (Italy)
ORCID ID: orcid.org/0000-0003-1164-4410
The principle of continuity in financial reporting is a fundamental element in the preparation of financial reporting. The final amounts of a financial report are, by definition, the opening amounts of the following year. Of course, the reverse is also true. The opening values of one year represent the closing values of the previous year.
In Italy, this principle is only half applied in taxation. It applies to the future (i.e. the following year) but does not apply to the past (i.e. the previous year).
Of particular interest is the position of the Italian Court of Cassation, i.e. the highest court of justice, which applies this principle of "lame continuity" in its judgments. Despite the astonishment of scholars, the Court of Cassation continues to consider that the final inventories of one year represent the initial inventories of the following year but does not accept as an obligation the opposite case. Only time will tell if it will resolve this dispute between the Supreme Court and the basic principles of business economics regarding financial reports.
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