Analysts critical of IFRS disclosures

Leading analysts have warned companies to improve the quality of information provided on IFRS or face the consequences of uninformed investors creating market pessimism.

Link: European accountants study IFRS differences

Peter Elwin, head of accounting and valuation at Cazenove, said that he was especially concerned about the lack of disclosures on the impacts of new standards for financial instruments. ‘IAS39 increases disclosures, which is welcome, but the rules are complex and the outputs are not always easy to understand. This can cause confusion and analysts will always sell first and work out the answers later,’ he said. ‘A number of companies are not adopting IAS32 and IAS39 for 2004, so the 2005 numbers could come as a shock.’

Sue Harding, European chief accountant at Standard & Poor’s, said that companies should strive for the highest levels of disclosure on the transition to IFRS in order to avoid uncertainty about the impact of the standards.

‘Companies should aim to provide disclosures that go beyond the minimum requirements to present a full picture and prevent surprises,’ Harding said.

Elwin said most of the information released by companies to date was ‘desperately unhelpful’ as very few had provided any hard numbers ? opting instead for uninformative, boilerplate statements.

‘Unless companies explain the impact and the disclosures carefully, sentiment could be negatively affected. Companies need to get on with it and step up the level of explanation rather than putting off the evil day,’ Elwin said.

Elwin cited the example of financial services company Cattles plc, which saw its share price plummet because it did not provide sufficient detail on the impact of IFRS.

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