BusinessCompany NewsUtility share prices to be hit by IFRS

Utility share prices to be hit by IFRS

Utilities and energy companies' failure to properly communicate changes under international accounting rules could greatly affect share prices.

Link: IAS special report

A new report by PricewaterhouseCoopers has forecasted bigger swings in reported profits for the sector when international accounting standards are applied in 2005. It said that such companies would face increased volatility in their profit and loss accounts as a result of the new rules.

Manfred Wiegand, global utilities leader for PwC, said: ‘The change to IFRS is expected to trigger larger swings in reported profits, reflecting fluctuations in derivatives values. Lack of awareness and understanding could create shareholder concern and share price volatility.’

Utility companies currently use derivatives to hedge the risk of their long-term contracts with large customers and suppliers.

The International Accounting Standards Board has already come under pressure from the European Union to make concessions on its plans for derivatives, with particular opposition from the banking sector.

But the IASB wants to make accounts correlate more with actual year values. PwC has also forecast that the new international standards will have a significant impact on reporting oil and gas exploration costs. Under IFRS, the cost of decommissioning, or plugging and abandoning wells, must be recognised when the asset is first constructed, rather than spread over the longer term.

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

4w Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

5m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

5m Alia Shoaib, Reporter
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

8m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

8m Emma Smith, Managing Editor
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

8m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

8m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

8m Emma Smith, Managing Editor