European business: IAS will improve understanding
European companies are confident that IAS-IFRS will bring about a greater understanding of the financial health of companies and increase the comparability of accounts, according to a new study.
They also anticipate accounting convergence to mostly affect financial instruments, M&As and the valuation of assets.
The survey of 425 European listed and non-listed companies by accountancy firm Mazars reveals that the changeover will affect nearly five million companies in Europe.
Respondents fear that the use of ‘fair values’ instead of historic costs on company accounts may well result in an increased volatility of reported asset values, which in turn will affect share prices. However the listed companies believe that the changeover will benefit the transparency and reliability of their accounts.
Despite IAS-IFRS enabling business investors and analysts to directly compare European-listed companies, only one-half of the respondents think the new Standards will have any sort of impact on their competitiveness and growth. The respondents believe that ‘an accounting regime does not make a company either more or less successful’.
Mazars says that it is good corporate governance for a company to communicate the changes it is making to deal with IAS-IFRS. However only 20% of listed companies have currently set up an external communication strategy for financial analysts, shareholders or investors regarding conversion.