The main objective of the case is to discuss how to account for active investments in other companies according to International Accounting Standards. The application of IAS 27-28-31 is put to test due to the peculiarity in the ownership structure.

The case tells the story of the investment that Pirelli made into Olivetti and Telecom Italia between 2001 and 2006. Olivetti was a manufacturer specialized in computers and printers, whereas Telecom Italia is the dominant telecommunication company in Italy. Olivetti was acquired by Pirelli&C and Edizione Holding S.p.A through a vehicle company (Olimpia S.p.A). Pirelli&C is a leader as manufacturer of tires and cables, whereas Edizione is a financial holding that controls the Benetton Group. Both buyers represent part of the Italian economic leadership. In fact, Pirelli&C and Edizione Holding are the financial wings of two Italian industrial families Pirelli (whose leader is Mr. Marco Tronchetti Provera) and Benetton (with Mr. Gilberto Benetton as its leader).

The Italian corporate governance system is well suited for this case because of three distinguishing factors: pyramidal structure, interlock of directors and shareholders’ agreements. They are all present in the case. Within this system, it is possible to control a listed company without being the majority shareholder. A situation like this is therefore an interesting case to test how to apply International Accounting Standards on consolidation.