CEOs clueless on accounting standards

The adoption of International Financial Reporting Standards is proving
something of a headache for listed UK companies, with many chief executives and
other board directors failing to understand the new standards despite them being
in force for over a year.

According to a report published by PricewaterhouseCoopers, companies need to
spend more time to improve the knowledge of the accounting standards among
senior employees.

The survey found that while audit committees are seen as generally
knowledgeable about IFRS, one in six FDs believed the board has a ‘poor’ or
‘very poor’ technical understanding of the rules.

The poll also found that implementation costs had been higher than expected
without any clear benefits.

Two-thirds of those polled said internal costs had been kept below £500,000,
with a similar figure spent externally, but more than 10% of those polled had
spent £1m or more.

PwC’s Ian Dilks said many finance directors were concerned that the cost and
complexity of producing IFRS accounts exceeded the benefits.

‘Their expectation that a major benefit of the new standards would be
international comparability is matched by concerns over complexity and increased
volatility in reported earnings,’ Dilks said.

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Fiona Westwood of Smith and Williamson.