Corporate Australia’s response to IFRS varies from visceral opposition through to resigned acceptance, with only a few noisy pockets of support from those who believe the gain will eventually be worth the pain.
It has come at a bad time for listed Australian companies, particularly those in the financial services sector, that were already labouring under a raft of new regulatory changes, ranging from Basel II through to Sarbanes-Oxley.
The loudest critics have been the international finance companies based in Australia, such as insurance giant Axa Group that, because of its year-end, is preparing accounts for the old and new standards, plus separate accounts for its European and American operations.
Chairman and chief executive, Henrie de Castries, who was recently in Melbourne, bitterly highlighted the irony that the accounting industry should be the prime beneficiary of a tougher regulatory regime that its abuses helped create.
Mr de Castries is also sceptical the new rule regime will lead to convergence with the US system and suspects it will eventually make accounts more opaque for investors, meaning that vast expenditure of time and talent will create a system no better than the one it was intended to change.
‘She’ll be right mate’, appears to be the attitude of large swathes of the Aussie corporate community, a traditional Down Under belief in a happy ending, no matter how formidable the odds might appear.
A recent survey found that four-in-10 Australian CEOs lack sufficient knowledge of the financial reporting standards to competently sign the required declaration for company results, with an equal number claiming they would be ‘overly-reliant’ on their chief financial officer.
Research by recruitment consultancy Hays Accountancy & Finance found that many companies had seriously underestimated the amount of time needed to implement IFRS, making hot property of accountants and consultants who know the short-cuts.
The survey also discovered that compliance was regarded as more important than any other finance issue for seven out of 10 businesses, and that Australasian companies had spent more time on compliance and governance than their European counterparts.
Half the Australasian employers surveyed said IFRS skill shortages were more severe than those in other disciplines, with two out of three claiming it was difficult to find suitably qualified and available compliance and governance candidates.
Cynics might claim the loudest cheers for the new system are coming from the professionals in demand to ensure compliance, particularly among Australia’s four largest banks.
They are awaiting the nation’s prudential regulator to reveal its approach to the new rules, with their biggest fear that it would toughen up on what could be included in their Tier 1 capital, forcing them to rethink their management of capital.
Loud support for the changes have also come from various Australian state governments, particularly Victoria, whose treasurer John Brumby is confident the changes will be accepted internationally, making the triple-A rated south-eastern state a more attractive place for investment.
But the main accounting issue to emerge among the state governments has been the funding of their liabilities under the old defined-benefit pension schemes, with more pension liabilities having to be recognised under the new rules.
In a move likely to be followed in other countries, the National Institute of Accountants, one of the largest professional accounting bodies, has put pressure on the Australian Accounting Standards Board to set up an ‘technical advisory panel’ to help identify and address procedural and interpretation issues.
That follows widespread criticism within the profession that its peak body could have done more to help members come to grips with the changes and timetable, particularly because what happens here is being closely monitored around the world.
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Investment in people, tech and businesses impacts on EY's profit per partner figure
If businesses do not take cyber security seriously in their business planning regulators may do it for them, the ICAEW has warned
Dr Richard Willis provides a several thousand-year history lesson of the profession, from origin to modern-day