FDs under pressure to demystify IFRS

Finance directors are having to spend more time walking audit committees
through the company numbers as the panels are struggling to decipher the IFRS

Simon Lowe, head of Grant Thornton’s business risk services practice said:
‘The introduction of international financial reporting standards in pursuit of
the transparency agenda, may be a victim of the law of unintended consequences.

Anecdotal evidence suggests this area is a regular topic of conversation
amongdirectors concerned that they, and in particular audit committees, are
having to place increasing reliance on financial directors and auditors to
explain the IFRS accounts and to obtain appropriate assurance.’

Grant Thornton’s annual corporate governance review of the FTSE 350 showed
just over 20% of audit committees, including almost one in ten of the FTSE 100,
still do not identify members as having ‘recent and relevant financial
experience, or even invoke the default option of claiming collective

The study showed that only 41% of companies could say they were achieving
full compliance with the provisions of the combined code. It polled 306 FTSE 350
companies against the terms of the code and associated guidance in order to
determine disclosure attitudes across the index.

The other 44 companies are investment trusts, excluded from the study because
they are widely thought to be less demanding in terms of audit and company

Grant Thornton also said that examples of boiler-plating, where companies
merely repeat the same statement each year rather than reflect on changed
circumstances, appeared less prevalent in 2007 but there was ‘still some way to

‘On the face of it, 2007 has seen an improvement with 42% making some change
to their 2006 explanations,’ said Lowe.

‘However, on closer inspection we consider only about half of
these updates to be no more than superficial.’

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