This article appeared in Finance Magazine

IFRS - now companies must communicate effectively
European listed companies must prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) with effect for accounting periods beginning on or after 1 January 2005. However, the scale of IFRS implementation is broader than that, with a recent Deloitte study indicating that 92 countries will either require or permit the use of IFRS for publicly traded companies in 2005, writes Brendan Jennings.
Reports from the UK voice significant concern, with the regulators preparing to crack down on unscrupulous companies using IFRS to their advantage and fund managers currently informing staff of what to look out for when examining new accounts prepared under IFRS.

It is believed by many that poor understanding of IFRS among analysts could contribute to increased market volatility in 2005. Underlying these concerns is a perceived need in the marketplace for stronger, more effective communication by companies of the anticipated impact of IFRS on their financial position and results. There is an awareness that IFRS transition is a significant opportunity for a lot of choices to be made by companies regarding estimations and assumptions. Companies will have discretion to avail of options which could make the balance sheet stronger and which, in turn, will directly affect earnings.

The risk is that if the market fails to understand changes, it is likely to adopt a sell now, understand later approach. This may lead to significant volatility in share prices, inability to predict market trends and a move by some fund managers to move out of equities into more stable forms of investment, if only to ride out the storm.

What can investors expect?
Recent announcements by a number of UK PLCs show a wide disparity in the anticipated
This article appeared in the January 2005 edition of Finance Magazine.