A comprehensive report on the implementation of IFRS in three EU
member states, has made a series of policy recommendations that
could assist companies adopting IFRS in the future.
The project, led by academics from Dundee University in Scotland
and the University of Brescia in Italy and published by the
Institute of Chartered Accountants in Scotland, examined the annual
reports of 175 companies in the UK, Ireland and Italy.
The main economic impacts on the annual reports of companies
switching from local GAAP to IFRS were found to be increased
reported profits and reduced net equity.
In the UK, reported profits were 51 percent higher under IFRS
than those reported under national GAAP. In Italy, the increase was
18 percent and in Ireland, 12 percent.
In the UK, net equity under IFRS was 35 percent lower compared
to that reported under national GAAP. In Ireland the IFRS equity
was 6 percent lower. In Italy, equity was 3 percent higher under
IFRS.
The report’s authors made a series of recommendations on how to
ease the IFRS adoption process. These included the suggestion that
shorter, simpler annual reports that highlight management
performance and could be used for assessing the future prospects of
companies could be a helpful way to counter annual reports
increasing in size and, in many cases, complexity.
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By GlobalDataDue to the large reduction in net equity for UK companies, the
report suggested companies should communicate openly to ensure
stakeholders understand the financial strength of their operations
has not been affected by the change in the accounting standards per
se, although the changes may bring to light situations that had not
previously been disclosed or recognised.
The report also suggested language and cultural issues
contributed to the greater effect IFRS had on Italian companies and
users than those from the UK and Ireland. It suggested the timely
availability of IFRS translations could help mitigate this.
