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’.
UK senior partner Phil Verity has been elected for a second term at Mazars
An audit partner has been appointed at Grant Thornton in its North West offices
KPMG has been appointed with “immediate” effect as the auditor of Dorcaster
The audit for Ibstock will be taken over by Deloitte following a competitive tender process