Analysts gear up for IFRS

Author:\N

JEL:

DOI:

Keywords:\N

Abstract:
• Analysts more confident on IFRS than a year ago\r\n• Fewer expect market turmoil\r\n• But fewer believe IFRS will give them greater insight into a company`s true financial position\r\n\r\n\r\nAnalysts believe that their knowledge and understanding of International Financial Reporting Standards (IFRS) has significantly increased over the last year as companies have stepped up their programmes of briefing and communication, according to a new report from the KPMG International Financial Reporting Group. But as their knowledge of IFRS has grown, the belief that the new accounting standards will actually give them a greater insight into a company’s true financial position appears to have diminished.\r\n\r\nThe report, On the Threshold of IFRS, is the result of research among 100 buy- and sell-side analysts. It found that over three quarters (76 percent) of analysts believe they know a fair or a great deal about IFRS, up from 60 percent in a similar piece of research conducted a year ago.\r\n\r\nNearly four in five analysts (78 percent) are confident that they will be able to distinguish changes in financial reports that are the results of underlying business performance from those due to the accounting changes, whereas a year ago only 54 percent of analysts were confident.\r\n\r\nThis growth in analyst confidence seems due in large part to a much more proactive approach from companies, who have taken steps to brief analysts on the sorts of changes they are likely to see under IFRS. A year ago, 47 percent of analysts said that they had had no briefings from the companies they track on IFRS, but now this has fallen to just 13 percent. Nearly 6 in 10 analysts say that most or all of the companies they track have given them briefings, as opposed to only 12 percent a year ago. Satisfaction with briefings is high, with 82 percent of analysts rating the information received as very or fairly good. Overall, 78 percent of analysts feel that the quality of communication from companies has improved since last year.\r\n\r\n„We believe that the market is likely to force more consistency of application over time, as best practices become established”, said Aura Giurcaneanu, Audit Partner within KPMG in Romania.\r\n\r\n„Those companies that do not conform could find that their non-conformity becomes very visible, and may suffer as a result”, she continued. „Romanian authorities and companies must be well aware of this and be prepared, as the EU accession is knocking on the door”, Giurcaneanu concluded.\r\n\r\n„As this survey shows”, added Vaessen, „companies have been quite successful in their communication efforts so far. A greater understanding of IFRS will help analysts to see past any inconsistencies arising in the transition phase and to capitalise on the benefits of increased transparency and comparability in financial reporting across the EU and globally.”\r\n\r\n„The new standards, which take full effect when companies report their 2005 full-year results, are intended to narrow the differences between the mainly European standards and those applied in the US, making it easier for market regulators to accept foregin accounts”, said Victor Kevehazi, Senior Partner of KPMG in Romania. „Romania sooner or later will have to take this step. Better sooner than later”, concluded Kevehazi.

---