Capital Markets

CAPITAL MARKETS | COVID-19: Consob issues operational guidelines to the market with regard to financial information, prospectuses and audits

On 9 April 2020, by warning notice No. 6/2020 (“Notice”), Consob provided the market with some operational guidelines on financial information to be provided in periodic reporting documents and prospectuses, as well as on auditing activities.

1. Financial information to be provided in periodic reporting documents and statutory audit

With regard to the financial information to be reported in financial statements and prospectuses, the warning Notice encourages companies to highlight with the greatest possible transparency – as required by the international accounting standards – the effects that the COVID-19 health emergency may have on business activities, both with reference to financial statements as of 31 December 2019 currently being approved and subsequent quarterly or half-yearly reports[1].

In particular, in relation to financial statements, the Authority has specified that, for the purposes of the proper application of the international accounting standards, directors must ground their assessments regarding the assumption of a going concern basis on all information available on the future, acquired up to the date of approval of the financial statements.

Moreover, according to the Authority, given the current situation of uncertainty, directors shall pay particular attention in providing detailed information on the basic assumptions used for cash flow projections. Significant attention shall be paid in performing sensitivity analyses regarding the potential impact of the current pandemic on the assumptions underlying the estimates made.

According to Consob, in the present context, along with the requirements of the international accounting standards, the information to be provided in the directors’ management report accompanying the financial statements may prove to be of relevance. In this regard, where relevant, the Authority requires issuers to provide up-to-date information on (i) risks associated with COVID-19 that may affect capital, financial position and operating results, (ii) any measures taken or planned to mitigate such risks, as well as (iii) an indication of the qualitative and/or quantitative relevance of potential impacts taken into account when estimating the Company’s future performance.

In addition to the above, Consob has requested directors to carefully assess, in reports after 31 December 2019, whether the industrial planning is up to date in order to evaluate the main risks related to the aforesaid pandemic that could preclude the achievement of strategic objectives and/or compromise business continuity.

It should also be noted, as clearly pointed out by ESMA[2], that any knowledge of significant impacts of the COVID-19 pandemic on business activities, performances or prospects of the issuer must be communicated to the market without delay pursuant to Regulation (EU) 596/2014, the so-called Market Abuse Regulation.

A similar warning has been addressed also to auditors of listed issuers, having Italy as their home Member State, and auditors of issuers of financial instruments widely distributed among the public, which apply the international accounting standards. In particular, the Authority has requested said auditors to pay specific attention to the audit procedures required by the ISAs that may be applied in the particular circumstances created by COVID-19. In this regard, the Authority refers to the content of the Statement adopted by CEAOB[3] (the Committee of European Auditing Oversight Bodies) on 24 March 2020, which highlights the main areas that may be affected by the impact of COVID-19 when carrying out audits on financial statements closed at 31.12.2019.

The Statement draws the auditors’ attention, including with regard to group audits, to the need to obtain evidence to express an opinion, to business continuity issues, to the adequate disclosure of the effects of “subsequent events”, to the importance of discussions with those responsible for corporate governance and to the representation of “key aspects” in the audit report.

Finally, in the Warning Notice, the supervisory bodies of listed companies, also in their capacity as audit committees pursuant to Article 19 of Legislative Decree No. 39/2010, are requested during this period to strengthen their interactions with the administrative bodies and to promote effective and timely communication with the auditors, in order to mutually exchange information useful for the performance of their respective duties, also pursuant to Article 150, paragraph 3, of Legislative Decree No. 58/1998 (Consolidated Law on Finance (“TUF”).

2. Financial information to be provided in prospectuses and offer documents

As regards, instead, prospectuses for take over bids/admission to trading of financial instruments as well as the related supplements, Consob’s Notice has highlighted the need for those responsible for drawing up these documents to provide qualitative and quantitative information to give an account of the impact of the COVID-19 pandemic on the specific company business, this is in order to make investors understand the risks associated with the investment as a result of the current pandemic. In particular, it will be necessary to update the “Risk Factors” section of the prospectus to take into account the possible impacts of the COVID-19 pandemic. The risks represented must be significant, specific and supported by the information contained in the prospectus, in accordance with the Prospectus Regulation and the relevant ESMA Guidelines.

Directors shall also update information regarding business plans, forecasts or estimates of profits previously disclosed to the market or indicate that they are no longer up to date. If plans, forecasts or estimates of profits are updated, the assumptions and hypotheses used to estimate the impact of the current pandemic shall have to reflect the principles of reasonableness, precision and specificity required by the rules governing the drafting of the prospectus.

Also in relation to take over bids or public exchange offers, without prejudice to the foregoing with reference to prospectuses to be drawn up for the offer of financial products offered in exchange, the Authority has stressed the need for the offer document to contain information suitable to give an account of the known impact of the current COVID-19 pandemic on the specific business of the offeror and the group to which it belongs, on the related prospects as well as on future plans drawn up in relation to the offer; also the issuer’s statement shall have to include information on the possible impacts of the COVID-19 pandemic, in relation to the information provided for by Article 39, paragraph 1, letters e) and f) of Consob Regulation 11971/1999 (so-called “Issuers’ Regulation”).


This article is for information purposes only and is not, and cannot be intended as, a professional opinion. For further information please contact Lukas Plattner.


[1] In March 2020, ESMA published specific public statements (ESMA 71-99-1290 of 11 March 2020; ESMA32-63-951 of 25 March 2020; ESMA31-67-742 of 27 March 2020) on the impact of COVID-19 on the financial reporting of listed companies, containing recommendations which are fully referred to in this document. In line with ESMA public statements mentioned above, directors will assess, on the basis of the specific features of the company and of the information available, the relevance of the qualitative or quantitative impacts of COVID-19 on the capital, financial position and operating results as of 31 December 2019.
[2] ESMA recommends action by financial market participants for COVID-19 impact, 11 March 2020: «Market disclosure – issuers should disclose as soon as possible any relevant significant information concerning the impacts of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation».
[3] Cfr. CEAOB 2020-008 of 24 March 2020.

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