IFRS update December 2005 – AIM

As a trained accountant and one-time head of mergers and acquisitions at
KPMG, Zetar chief executive Ian Blackburn is relaxed about the time and money he
has to put into international financial reporting standards.

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resource centre

‘Everything today in business life is a hassle,’ he says. ‘There are new
rules, accounting standards, government regulations coming in all the time, so
you just have to move with it. It is modern business so there is no point
moaning. Of course it takes up time and there is always a cost, which is a
distraction from the main concern of running a successful business.’

The business he runs is £20m startup Zetar, which was
launched on AIM
in January with the express purpose of building up a confectionery group through
acquisitions. In April it paid £30m for Kinnerton, one the UK’s biggest
chocolate manufacturers.

Between this venture and KPMG, Blackburn was finance director and chief
executive of Perkins Foods.

‘I have talked a lot with my accountants about IFRS and we have taken the
view that since there is no precedent for small companies and how they handle
these new accounting rules it’s best to wait until others have gone before. We
do not have to comply until 2007, so that’s when we will have fully done the

But that doesn’t mean Blackburn is totally ignorant or inactive about the
changeover. He knows that with the substantial option packages on offer in the
company, it is an area that he will have to address.

He has already done the rounds to find out if anyone can calculate what these
will have to be costed at. ‘Frankly, I have been quoted silly money to do what
is a fairly straightforward calculation. It is just a basic formula so I have
decided that it’s something I will probably work out either myself or with my
financial director when he or she is appointed.’

One reason why Blackburn feels no rush to fully comply with IFRS is that he
has already talked with many of the important stock market analysts about
whether Zetar will be marked down or misunderstood if immediate compliance
doesn’t happen.

‘They have said they will have no problem valuing the company with or without
IFRS. In the end, whatever else is happening and affecting the profit and loss
accounts, you cannot disguise cashflow, which is still the most important
feature when it comes to valuing a company.’

There are two other elements of the new regime that have a particular impact
on Blackburn. Because Zetar is growing by acquisition, the new way of valuing
goodwill each year, rather than over a period of years, could have a dramatic

‘If you have made a bad buy and it goes negative, it is now going to show up
very quickly. I don’t make bad buys, so I am not unhappy about this. You should
never pay for goodwill under any accounting regime unless it’s going to generate
cash and profit. Others may be worried about this coming in, but I think it will
help us.’

As the company is active in the forward buying of chocolate and currency as
well as buying swaps to protect against interest rate changes, this is another
area where Blackburn has been exercising thought and effort. He hopes to
incorporate changes in these areas next year rather than in 2007.

‘There is a bit more paperwork but I feel the end-result will be a smoothing
of results, which will be beneficial ­ as I hope the whole of IFRS will be.
Better people than I feel that, with the new ways of presenting accounts,
shareholders and investors will find it easier to value a business. If that is
true, it is all for the good.’

For the latest news
and analysis on IFRS, updated every week, visit Access IFRS – PwC’s IFRS
resource centre

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