PracticeAuditIFRS paves way for 2005

IFRS paves way for 2005

The release of the first full international financial reporting standard has been welcomed by accountants, but there are warnings that company accounts will need to be restated and tough choices made.

Link: Firms ill-equipped for start of IFRS

IFRS 1 is the first of the new global accounting standards, which will be mandatory for all companies listed in the EU from 2005. It explains how a business should make the transition to IFRS 1 from any other basis of accounting.

According to Mark Vaessen of Big Four firm KPMG, it will bring much needed clarity to the adoption process. He was also pleased that some of the more difficult restatements, such as accounting for past acquisitions and assigning a retrospective fair value to assets, were not required in the final standard.

But he warned that at the start of the earliest comparative period, which for many companies could be the end of this year, information in the profit and loss account and balance sheet would have to be restated.

Rival firm PricewaterhouseCoopers also warned of the dangers of restatements, especially the market reaction to those companies whose historical earnings record will look very different following conversion.

‘The transition to IFRS is not just about accounting,’ said Peter Holgate, UK senior accounting technical partner at PwC.

‘Companies must also address the wider implications of conversion, such as the impact on financing agreements and remuneration packages, how to collect the necessary data for the increased disclosure requirements and how to explain the differences to users of their financial statements.’

IFRS 1 was published last week and is the first on a controversial list. Such a warm welcome is not expected for future standards, for example, those dealing with share options.

IASB chairman Sir David Tweedie said IFRS 1 was ‘designed to ease the transition for all concerned and to ensure that users of accounts are given high-quality information’.

Related Articles

KPMG replaces PwC as Croda auditor

Accounting Firms KPMG replaces PwC as Croda auditor

3h Emma Smith, Managing Editor
EY fined £1.8m over Tech Data audit

Accounting Standards EY fined £1.8m over Tech Data audit

3d Emma Smith, Managing Editor
Top 50+50: Firms post significant growth in new tax and audit rankings

Audit Top 50+50: Firms post significant growth in new tax and audit rankings

6d Emma Smith, Managing Editor
FRC closes KPMG HBOS audit investigation, Treasury Committee expects ‘full explanation’

Accounting Firms FRC closes KPMG HBOS audit investigation, Treasury Committee expects ‘full explanation’

4w Emma Smith, Managing Editor
PwC to audit BBC pay policies following gender pay gap outrage

Accounting Firms PwC to audit BBC pay policies following gender pay gap outrage

1m Alia Shoaib, Reporter
FRC closes investigation into PwC over Barclays compliance

Accounting Firms FRC closes investigation into PwC over Barclays compliance

2w Alia Shoaib, Reporter
KPMG rocked by South African corruption scandal

Audit KPMG rocked by South African corruption scandal

3w Alia Shoaib, Reporter
BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

4w Emma Smith, Managing Editor