The guide recommends the key decisions directors should take now and over the coming 12 months to avoid market speculation that could affect share price and credit ratings.
Deloitte audit partner, Mark Rhys, said of the publication: ‘Any Boards not fully prepared for the 2005 transition will hear the clock ticking loudly – it’s too late in the day for any un-addressed IFRS issues to stay on the bottom of the to-do list. Directors need to check all measures have been taken to avoid any nasty surprises in the New Year.’
The publication recommends clear and early communication to shareholders and stakeholders in a number of key areas. According to the firm, these include:
Performance evaluation – Most companies will need to restate one year of accounts under IFRS to provide a basis for investors to compare results. A communication programme must be in place if standards, such as IAS32 and 39, will radically alter the picture.
Key Performance Indicators – KPIs traditionally discussed in the Chairman’s statement may change considerably under IFRS, and companies must be in a position to explain the impact and present KPIs more relevant to understanding performance reporting. Investors and other stakeholders also need to be able to understand comparability with competitor KPIs.
Increase in volatility – IFRS requires greater use of fair values than other accounting frameworks and there will be increased volatility in results. Early communication of one-off adjustments on first-time adoption and the continuing sources of volatility will be paramount.
Communication timetable – Companies must decide on the method and timing of their IFRS communication to the market, considering whether to release information with competitors.
The timetable promoted in the Deloitte guide suggests that by the end of the year companies should have selected IFRS accounting policies for adoption in 2005, prepared 2004 opening balance sheet under IFRS with reconciliation and prepared comparatives for IFRS interim financial statements. They should also be in a position to publish 2004 UK information in the first quarter of 2005.
The full guide is available at Deloitte’s dedicated transition website:
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