RegulationAccounting StandardsIFRS application ‘inconsistent’ as benefits fail to materialise

IFRS application 'inconsistent' as benefits fail to materialise

Analysts at Standard & Poor's find inconsistent implementation of IFRS is undermining principle of standards

Companies are still implementing IFRS in radically different ways, a trend
that is undermining the aim of the standards to create a common accounting
language across the world, according to analysts at credit rating agency
Standard & Poor’s.

It has been more than two years since IFRS, the brainchild of the
International Accounting Standards Board, led by chairman Sir David Tweedie,
became mandatory for listed companies in Europe. Yet the benefits of the new
reporting are still far from being realised, said Sue Harding and Raam Ratnam in
a Standard & Poor’s report.

‘Although companies have amended their financial statements and reports to
comply with the new standards, the extent to which IFRS is embedded in corporate
financial reporting systems and processes varies widely,’ the analysts said.

Harding and Ratnam said the fact that several companies had not incorporated
IFRS into their daily financial reporting was a major concern, even though
others had embraced the opportunity to improve their reporting with the
introduction of the standards.

‘Some companies have seized the opportunity to assess and improve their
financial reporting systems. A sizable number, however, have viewed audited IFRS
financial statements as the end game in their transition,’ the analysts said.
‘Many IFRS-compliant companies have yet to fully use IFRS as their basis of
day-to-day primary financial reporting.’

The concerns raised by Standard & Poor’s follow fears that hundreds of
companies that had already made the transition to IFRS were facing further
restatements to iron out inconsistencies in the way the reporting regime was
implemented.

At the end of last year, the International Financial Reporting
Interpretations Committee (IFRIC) revealed that up to 40 accounting treatments
proposed by companies had been rejected, prompting predictions of widespread
restatements to improve the consistency of IFRS numbers.

Harding said more could be done to improve the ‘clarity of information that
would make company transactions, accounting policies and resulting figures
considerably more understandable’.

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