PracticeAuditIFRS hit to dividends explored by EC

IFRS hit to dividends explored by EC

Accounting changes could curtail shareholder payouts

The European Commission is to investigate the impact on dividends for companies switching to IFRS.

Link: IFRS update 2 – a management briefing

Worries that changes to company accounts would render some companies unable to pay dividends to shareholder were acknowledged by the EC’s Accounting Regulatory Committee, which has now commissioned a study on non-cash deficits brought onto the accounts by IFRS.

Under EU law, companies are only able to pay dividends if they have positive distributable reserve, but under IFRS those reserves can be severely impacted by items such as pensions.

The ARC also gave a favourable opinion on the International Accounting Standards Board’s revised version of the fair value option in IAS39. The way is now open to it being included in the EU’s version of the standard, removing one part of the infamous carve-out.

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