Truthfulness or trib-truthfulness of financial reporting? A Historical Analysis: I. Financial reporting and tax regulations from 1861 to 1960 in Italy by Maria Silvia Avi

1.

 financial RepoRTing and Tax law:  
inTRoducToRy RemaRks
 1. Tax and Financial Reporting Legislation: Introductory Remarks
 Financial reporting is a complex document with twofold purpose: to be 
a business management tool and to represent the communication element 
par excellence towards the company’s external community. Financial 
reporting, interpreted as a business management tool, is not subject to 
any regulations, and the company can draw up this document according 
to the criteria it deems most correct. This is true from both a formal and 
a substantive point of view. However, from a substantive point of view, if 
financial reporting is true and correct, it is not clear how internal financial 
reporting could be different from financial reporting that must file with the 
Chamber of Commerce to become a public document. The form, on the other 
hand, i.e. the classification structure of the financial statements, if such a 
document is internal, is free. Each company may opt for the reclassification 
it deems most consistent with its overall situation and organisation. This 
text will focus only on public financial reporting, i.e. the document intended 
for third parties external to the company. This document has undergone 
considerable changes over time concerning the items’ substance and the 
form of the financial statement structure. In the first and second volumes of 
this trilogy of textbooks, we will analyse the historical legislative evolution 
of financial reporting. This analysis will, however, be complemented by the 
simultaneous in-depth examination of tax legislation concerning corporate 
income taxation and its connection to financial reporting results. Here, too, 
attention will be focused not so much on the individual tax regulations that 
have followed one another over time but on the interrelationships that can 
be identified between these regulations and the content of financial reporting 
regulated first by the commercial code and then by the civil code. As we shall 
subsequently highlight, there are companies subject to IAS/IFRS, which we 
shall discuss in the following pages. The analysis in these texts will, however, 

focus mainly on the financial statements governed by the civil code and the 
tax legislation relating to companies that must prepare their financial reports 
following the civil code.
 The main objective of the trilogy of texts is to identify what kind of 
relationship has existed and still exists between civil law and tax law. In 
addition, the pragmatic behaviour of the financial reporter will be analysed, 
since, as will be shown in the third volume, the attitude of the financial 
reporter does not always follow the normative dictate of civil law and 
tax law.
 The theoretical analysis of the interrelationships between civil and tax law 
financial reporting will therefore be completed by an in-depth examination 
of the operational behaviour of those who draw up the balance sheet, the 
profit and loss, the notes to the accounts and the cash flow statement.
 In the third volume, in which the results of 25 years of research into the 
relationship between financial reporting and tax law will be presented, it will 
note that the pragmatic behaviour of financial reporting practitioners often 
does not reflect the dictates of statutory and tax law.
 In the first two volumes of this trilogy, however, the historical evolution 
of the relationship between financial reporting and tax law will be analysed 
up to the present day, where, if one had the will, one could comply with the 
tax law and apply the civil law, even if this might mean losing a tax benefit 
that very few wish to lose.
 The following pages will analyse these issues from a theoretical and 
operational point of view. The analysis will begin by considering the financial 
reporting t relationship period at the end of the 1800s. The second volume, it 
will end with the current regulations regarding this relationship.

Truthfulness or trib-truthfulness of financial reporting? A Historical Analysis: I. Financial reporting and tax regulations from 1861 to 1960 in Italy by Maria Silvia Avi