While not as headline-grabbing among the world at large as the introduction of the euro, the arrival of IFRS shares a few common themes (not least the fact that, for both, the rules had to be changed or bent to accommodate the French). For example, just as the single currency was to increase the pool of capital available to businesses in the eurozone, so IFRS are intended to play their part in creating the Brussels dream of a single European capital market by creating cross-border comparability in accounting and, hence, company valuations.
None of this comes cheap, and it’s tempting for many to argue that the UK is paying the price for the poor accounting standards and disclosure requirements in other countries. We note a recent Morgan Stanley report (see page 11) which highlights the fact that the transition risks will be highest in the likes of Italy and Spain. And Germany. And France.
But this argument is, in effect, lost (if indeed it ever was a good argument to make in the first place) as UK standards themselves are now converging towards IFRS, so much of the transition work will have to be undertaken even by companies that aren’t obliged to adopt IFRS.
Be warned, though, that the 80-20 rule will come into play – the one that says 80% of the work takes 80% of the time, and the last 20% also takes 80% of the time. And there are plenty of things that need to be done over and above getting the numbers right. Explaining it all to the board, staff and shareholders is top of the list, for the IFRS project doesn’t amount to a hill of beans if no one can make sense of it all.
So, good luck and best wishes for a prosperous 2005 – regardless of what accounting standards you use to report that prosperity.