With the objective of analyzing the adoption of IFRS by European companies, the EU commissioned a survey on the implementation of IFRS in the EU. The results of the survey dictated that IFRS implementation in Europe had been challenging, but successful and IFRS implementation was generally seen as a positive development for EU financial reporting. Specifically, there was a widespread agreement that IFRS made financial statements easier to compare (across countries, competitors within the same industry sector and across industry sectors), and improved the overall quality of the consolidated financial statements. The survey also indicated that larger companies especially had prepared early, and had devoted considerable resources to educating and training their boards, staff and investors. The experience of smaller companies was often very different from the larger companies, because of limited resources and lack of prior experience of IFRS.

The survey indicated several concerns and challenges along the path to IFRS adoption. Key concerns and challenges identified included:

• Extensive training required for staff, investors and board members;
• Complexity of the new requirements as compared to legacy local Standards making the IFRS financial statements more difficult to Understand;
• Increased amount of judgment by preparers and auditors to apply the principle-based standards;
• Concerns about consistency of application;
• Extensive reliance on fair value measurements for standards relating to financial instruments and business combinations;
• Lack of internal knowledge and expertise and consequent reliance on external advisors and auditors; and
• Significant one-time costs of converting to IFRS (including costs of internal personnel time, adapting IT systems, implementing revised reporting policies and processes, training personnel and educating investors, analysts and members of the board).

The benefits and challenges to IFRS adoption were also discussed by panelists at the Roundtables organised by the SEC to seek inputs on adoption of IFRS by U.S. companies. The views of the panelists in the U.S. were generally similar to the experience of companies, investors and auditors in Europe. Panelists foresaw that adopting IFRS would facilitate comparing U.S. companies' financial statements to their global competitors, reduce the cost of capital formation for U.S. companies by giving them access to global capital and increase the competitiveness of U.S. capital markets. However, the panelists foresaw challenges relating to significant one-time costs and training and education requirements.

The above experiences and debates provide useful insight into benefits and challenges that Indian companies will face as they adopt IFRS. There is more to be gained from convergence to IFRS than just the approval of potential investors and compliance with legislative requirements. Companies in the European Union and across the globe that have adopted IFRS have realised a number of other advantages.

PIRON services are partnered with ATC INTERNATIONAL

ATC International is a finance and accountancy training company operating in Central and Eastern Europe since 1993, making us the first provider of high-quality training in this market. Since then, we have helped many thousands of individuals to achieve their career goals, and hundreds of organizations to improve the value of their human capital.

ATC have 6 offices in the region, as well as a central office in London. Some of the 20 countries where we work:

ATC’s clients include individual students and international and national companies, including the Big 4 accountancy firms. They come from many business sectors such as manufacturing, Service and Consulting, and many of them have been with ATC since 1993.

IFRS provides more comparability among sectors, countries and companies. Due to its universal appeal, it can both improve and initiate new relationships with investors, customers and suppliers across the globe, since financial statements in accordance with IFRS cut across borders. IFRS will facilitate better comparability of performance with other businesses and reporting under IFRS may also result in greater transparency about a company's activities to outsiders such as investors, customers and other business partners. As Indian businesses become more global in terms of their operations and investor base, IFRS would enable a comparison of Indian companies with global peers.

Financial reporting in the United States is being influenced by International Financial Reporting Standards (IFRS). IFRS reporting considerations are already impacting business decisions, and not simply through non-US subsidiaries. The SEC is considering measures that could lead to retiring US GAAP and adopting IFRS in the US. However, the effects of global reporting on US companies will accelerate over the next few years, regardless of how the SEC proceeds. Understanding IFRS and its business implications is a competitive imperative for US companies.

Conversion is much more than a technical accounting issue. IFRS may significantly affect any number of a company’s day-to-day operations and may even impact the reported profitability of the business itself. To help you understand the impact of IFRS, we have prepared a series of explanatory materials, which can be found on our publications page.

PIRON Services has a proven track record in helping companies successfully understand and work with IFRS. With our extensive worldwide experience in all major industry sectors, we propose practical solutions to address challenges that companies face with IFRS. Our specialists bring technical accounting, process improvement, training, communications and change management experience to the project—reflecting the complexity of the task at hand. And while many of the issues are common across all businesses, some have a greater impact on certain sectors so we'll ensure our industry specialists are involved.