Eight thousand companies have implemented International Financial Reporting Standards, but there is a risk that key information could be obscured by the sheer volume of data required by the new standards.

This is the conclusion of an Ernst & Young report released today, which followed a review of the financial statements of the 65 largest companies reporting under IFRS for the fiscal year ended 31 December 2005.

E&Y's head of global IFRS practice, David Lindsell, said companies still had a long way to go improving consistency and comparability.

'The onus is on regulators, advisors and corporate managements to rapidly come to common understandings to drive best practice and remove anomalies in the existing standards, so that IFRS adds real value for investors and companies alike,' he said.

Issues that emerged with the application of IFRS include:

• Companies have adopted an approach that minimises the changes from previous national standards, reducing the ability, for example, to compare across an industry.
• Due to the gaps and inconsistencies within the body of IFRS standards and the absence of industry-related accounting guidance, IFRS implementation has required extensive judgement to be used in the selection and application of IFRS accounting treatments, again reducing consistency and comparability. IFRS is not based on a coherent, integrated set of principles, while some individual standards specifically permit alternative accounting treatments.

• Companies are not confident that IFRS financial information is sufficient, or in some cases entirely appropriate, for the purposes of communicating their performance to the markets.

• IFRS financial statements are significantly more complex than financial statements based on national accounting standards. This complexity threatens to undermine the usefulness of IFRS financial statements in making decisions. There is a real danger that the preparation of financial reports will become a technical compliance exercise rather than a mechanism for communicating performance and the financial position of companies.

Lindsell added that greater emphasis needed to be placed by preparers of financial statements on explaining the key judgments applied in determining amounts reported, including the sensitivities around those judgments.