PracticeAuditFirms ill-equipped for start of IFRS

Firms ill-equipped for start of IFRS

Financial institutions are not prepared for the introduction of international financial reporting standards in 2005, as many are so daunted by the size of the task they do not know where to start.

Link: Enforcement: Safeguarding the standards

The lack of preparation has been highlighted by recent PricewaterhouseCoopers research, but also in statements by senior finance directors, including Norman Green of Oracle.

A report by PwC and the Economist Intelligence Unit showed that, while 92% of financial institutions around the globe were in favour of a single set of global accounting standards, only 34% would be using IFRS by 2005.

More worryingly, the survey found that, of those required to adopt IFRS by 2005, only 42% have started the implementation process.

‘The sheer magnitude of the task is putting some people off getting started,’ said Nick Rea, director in valuation and strategy at PwC UK. ‘There is such a broad range of issues that they don’t know where to begin.’

Rea added that implementation is being delayed as companies wait to see what the final standards will be. Meanwhile, others are simply not giving the task a high enough priority.

In the survey, only 22% thought IFRS was one of the top business issues they faced, while just 38% felt their institution had a good understanding of the proposals.

This concern was shared by Green, vice-president of finance at software giant Oracle UK & Ireland. He said there was ‘a lot of ignorance about IAS 2005’ and was seriously concerned about how prepared Britain is for the impending legislation change.

‘Companies will not be ready to deal with the complexities of reporting. The amount of reporting that it requires is way beyond what they are currently used to,’ he said.

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