IFRS – The story so far

Link: PwC’s dedicated IFRS site

When Accountancy Age came to choose the recipient of an Outstanding Achievement Award to mark our 35th anniversary in November 2004, there was only one name on our shortlist.

In driving through reform of accounting standards in the UK after the corporate excesses of the 1980s, Sir David Tweedie had already acquired a formidable reputation. But in steering through preparations for this month’s launch of international financial reporting standards in Europe, he has faced his greatest challenge yet.

For 7,000 listed companies across the European Union, 1 January 2005 marked the end of the beginning when it comes to international financial reporting standards.

They are now a reality and for finance departments, auditors and regulators alike, the coming months represent some of the most challenging that they will have ever experienced.

Accepting the accolade at last year’s Accountancy Age Awards, Sir David warned the 1,000 partners, finance directors, regulators and implementers present not to underestimate the significance of the turn of the year.

‘We stand at an interesting time in accounting,’ he said with deliberate understatement. ‘We won’t get a second chance at getting a set of global standards. China is coming on board, Russia is coming on board. Even the Aussies are coming on board, with the Americans coming in too.’

No one should for a second underestimate the challenges faced to get us here. The row over IAS39 has hogged the headlines and dragged politics into finance – and the consequences are still being felt. Efforts by the Accounting Standards Board to pick up the pieces are ongoing.

‘We set out to give simple and straightforward advice on the carved out IAS 39,’ said chairman Ian Mackintosh.

‘Unfortunately, we have found the situation to be complicated and sometimes unclear. Consequently our guidance is much more lengthy and inconclusive than we hoped and will need to be studied carefully by preparers.’ Mackintosh is not the only one seeking clarity.

Sir David describes the furore over IAS39 as a ‘blip’. He would rather concentrate on the other standards that companies have to implement. And whether it is dealing with changes to share-based payment or leasing standards, those affected should too.

IFRS will bite more than just the technicians: corporate financiers, tax specialists and investors have to equip themselves too. In achieving this, recruiters, trainers and technology advisers will play no small part.

‘If IAS39 and all that went around that is a one-off then, overall, things are going as well as could be expected,’ says former ICAEW president and PricewaterhouseCoopers partner Peter Wyman. And while he admits to being worried about the precedent that the political interference around the financial instruments standard might have set, Wyman is happier with what he has seen happen on the ground.

‘It’s about implementing a set of standards that we have been given which are good in most parts and less good in others. As you’d expect.’ Most commentators are confident that the FTSE100 will get it right – and on time too. That will probably hold true for much of the FTSE350 too. However, below that, the picture is much less certain.

And while there will always be dishonourable exceptions, the overall picture is looking reasonably rosy, says Wyman. ‘I would probably give the standard-setting process nine out of 10. As for Europe, in light of IAS39 we would have to give it a much lower score – four out of 10. And in terms of implementation in the UK it’s quite right to keep on warning people but it will be alright on the night. Nine out of 10.’

And Sir David is upbeat too. ‘To be honest, I think many companies will find little has changed,’ he told Accountancy Age readers last year. ‘I don’t think the UK is going to have nearly as much of a problem as I think others are going to have.’

Now is the time to prove him right.

Link: PwC’s dedicated IFRS Resource Centre

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