IFRS having huge impact on banks’ balance sheets

Reporting earnings under
Financial Reporting Standards
(IFRS) for 2005 has had a marked impact on the
value of reported equity of Europe’s biggest banks, according to Ernst &

The Impact of IFRS on European Banks, a new study by E&Y due out
later this month, will show that the 24 major European banks analysed in the
study exhibitied a wide range of impacts by adopting the new rules.

As an example, Groupe Banques
recorded a gain in the value of the equity on its balance sheet of
22% with the adoption of IFRS, but under the same rules
Barclays saw an effective decline of
12% in reported equity value.

Tony Clifford, partner and IFRS banking specialist at Ernst & Young, said
the introduction of IFRS in 2005 has had the single biggest impact in a
generation on the balance sheets of Europe’s major banks.

He said: ‘Our analysis suggests that the European banks’ accounts should be
handled with care. Although all 24 banks have been reporting under the same
standards, the number of options available, differences in interpretation where
standards are not clear and the involvement by national regulators, means that
the presented numbers vary considerably.’

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Fiona Westwood of Smith and Williamson.