IFRS – The view from below

Link: PwC’s dedicated IFRS site

This is also a theme closely adhered to by its finance director, Mark Fenoughty, who, at the end of last year, announced that the Alternative Investment Market-listed business was preparing to adopt IFRS in 2006, regardless of AIM giving its 900-plus small cap companies a two-year reprieve.

Despite occasional disputes, the standards are now very much in place and Fenoughty says that he has been closely monitoring events for some months.

‘Myself, my staff and our auditors, Grant Thornton, have all been aware of the possible implications of IFRS for a long time. We have seriously assessed the impact of IFRS on the distribution of reserves and the way that we account and as far as we are aware there is nothing that impacts materially on our numbers.

‘Even if there was, we are more than ready to adapt. It is not a complicated process. The information for us to report is to hand so if we needed to add further disclosures then we could do.’

Fenoughty says the Blades, currently lying in the upper echelons of the Championship and closing in on possible promotion to the Premiership, need to attain certain goals to increase their ‘attractiveness’ as a business if IFRS is to come into play.

‘There are several balls in the air at present in terms of business strategy, including promotion to the Premiership and the ongoing development of a casino complex at Bramall Lane (Sheffield United’s home ground) that could increase our attractiveness as a business. This could change things and will hopefully soon be achieved.’

The club’s auditors have helped a great deal, says Fenoughty, and have been in constant contact regarding the compliance changes that are currently impacting UK plc.

‘We have a very close dialogue with our auditors. Fortunately our audit manager is also an IFRS champion and we are very lucky in that respect.’

The FD also says that the reprieve handed to AIM’s 900-plus small cap companies to delay compliance until 2007 was welcomed by many of his counterparts and other members of the profession.

‘The year’s breathing space will be helpful to many of the AIM-listed companies affected by the switch. We weren’t expecting the derogation but even if this hadn’t been the case we were more than prepared for any implications.’

Hundred Group of FDs’ 10-point plan on how to ensure IFRS compliance
Mindful of the need to ensure companies manage a smooth transition to IFRS by preparing shareholders and financial analysts, the body representing the UK’s most senior finance directors, the Hundred Group, has issued a ten-point plan on how to avoid a damaging mismatch of expectations.

Communicate a timetable in advance to stakeholders, setting out the availability and timing of information.

Consider co-ordinating the timing and detail of communications with other companies in industry and sector groupings to help facilitate better understanding across sectors and avoid unhelpful competition between companies.

Use additional communications channels including the company internet site and specific seminars or briefing sessions.

Continue to produce 2004 interim announcements (half yearly but also often quarterly) under UK GAAP.

Give an early indication as to which areas are likely to be subject to restatement. The final UK GAAP annual report should also include a detailed qualitative discussion of the effects of the transition to IFRS. Supplement that quantitative data.

Consider whether releasing IFRS information at the same time as the final UK GAAP preliminary announcement will cause confusion. But remember communication of forecast earnings guidance at the time of the preliminary announcement will be under IFRS.

Any separate presentation of full IFRS financial information, including comparative interim data, would best be communicated in the period between the final UK GAAP preliminary announcement and the first IFRS interim announcement.

Remember the burden of preparing extra IFRS information will be during the period when primary UK GAAP information is being produced.

As IFRS information will eventually become comparative information subject to audit, it needs to be robust and auditors should be engaged early in the process.

Reconcile information back to the original UK GAAP information, distinguishing between measurement and presentation changes.

Link: PwC’s IFRS Resource Centre

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