Decisions - Accounting standards

For example, the Royal Bank of Scotland states in its 2003 annual report that it spent the year assembling a dedicated IAS project team that has identified and is implementing a range of separate work streams. It is focusing on each difference in accounting that the team has identified as requiring “significant effort” to implement. The approach adopted by the team is to document the differences between the bank’s current accounting policies and IAS, then to set out detailed planning for the move to the new standards, including the identification of implementation methodologies and the specification of IT requirements. The scale of the impact on RBS’ financial and operational IT systems is still being scoped, but is likely to be significant.

But few, if any, listed companies are willing to talk openly about the impact of IAS on their financial software systems. This may be that many companies simply haven’t established how IAS will impact their business processes. As Chris Webb, spokesperson for software vendor CODA, says: “Many of our customers are concerned with IAS and have been satisfying themselves that software can support IAS compliance. But they are waiting to establish how IAS will affect their business before they go public on how technology can help.”

Although listed companies around the UK and Europe are waiting to see who blinks first with their IAS compliance systems, the problem of compliance is undoubtedly preying on the minds of finance directors. In a recent CODA survey of FDs – Corporate Responses to Governance Pressures – 48% of companies place their FD or CFO in overall charge of compliance and governance issues, and almost 90% of respondents agree that governance will not disappear in the next couple of years.

However, only 40% say IAS is either important or very important from a corporate governance standpoint, and 45% of FDs surveyed say the only reason for adopting IAS is that it is the law.

And while more than 60% of respondents say they are making significant changes to their systems because of governance issues, nearly 30% of FDs are neutral on whether systems changes for governance and IAS compliance purposes are expensive or not. CODA’s survey suggests a disconnect between finance and IT – FDs of listed companies and subsidiaries are obliged to report under IAS, but for many the software implications are passing them by.