European law now overrides national laws on accounting standards of all European Union member state, a move that makes Sir David Tweedie, the Britain heading the International Accounting Standards Board, one of the most powerful people in world finance.
But, accountants remain concerned over the preparedness of UK plc for the 2005 switchover.
Ian Wright, leader of global corporate reporting group at PricewaterhouseCoopers, said: ‘The requirement to use international accounting standards in Europe now has legal certainty. Companies should take this as their cue to start the change process in earnest.
A first step might be to assess the full impact of IAS on profits, assets and other key financial results, if they haven’t done so already.’
The new regulation on IAS represents the biggest change in European financial reporting for 30 years and will make the EU the world’s first region to have one common set of accounting standards. The move also provides a key plank in the EU’s drive for a single European capital market to rival that of the US.
For the first time investors, analysts and financial advisors will be able to compare the accounts of companies in Europe and worldwide that report under IAS.
It is widely thought that British accounting rules are the closest to IASs, but UK accountants warn there are still many significant differences that urgently need to be dealt with.
‘Don’t underestimate the potential differences because they can be very significant – recent company failures are prompting analysts and investors to take a much closer look at financial reporting and they are likely to be more unsettled in future by surprises,’ said Wright.
The warning is not a new one. Many of the largest accountancy firms began developing IAS training courses and educational software over a year ago urging company finance directors to get to grips with the changes well ahead of 2005.
But take-up has been slow.
In February, mid-tier firm Mazars Neville Russell also launched an IAS taskforce to respond to emerging issues for listed companies in a bid to prepare its clients for the switch.
Emerging issues are a huge gripe for finance directors since the IASB is still updating its standards. Sir David has, however, said that by 2003 its standards will be ‘completely in place’ giving listed companies two years to familiarise themselves with the standards before the 2005 deadline.
Sir David said: ‘The IASB has just recently completed its first proposals aimed at improving existing standards. In the coming weeks and months we shall be focusing our attention on continued improvements, easing implementation of the standards, and worldwide convergence.’
The changes will affect more than 7,000 listed companies in Europe.
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