There are now just eighteen months to go before the beginning of 2005 and the mandatory use of International Financial Reporting Standards (IFRSs) in the group accounts of EU listed companies. The International Accounting Standards Board (IASB) last month issued IFRS1, which specifies how companies should effect the transition from current accounting policies to those mandated in IFRS. There are many more new standards to come.
Due for publication in the autumn of 2003 are twelve revised international standards covering topics as diverse as foreign currency translation, stocks, fixed assets, leases and related party transactions. These derive from the ‘Improvements’ exposure draft published by the IASB in May 2002 and repeated in our FREDs 24 to 29. They are to be closely followed by a new standard on share-based payment, from the material published in the UK as FRED 31.
In the early months of 2004, we can expect eight new international standards. Three will stem from the material in our December 2003 Consultation Paper - on business combinations, impairment and intangible assets. Three will derive from exposure drafts not yet published by the IASB (on insurance contract accounting and asset disposals - both proposals due this month - and on provisions - proposals expected in September).
The other two for publication by early 2004 are the revised versions of IAS 32 and 39, the IASB’s standards on the recognition, presentation, measurement and disclosure of financial instruments. The revisions were foreshadowed in our FRED 30, although the IASB has since made tentative decisions to change some aspects of that material and a short exposure draft on limited further amendments may appear this autumn. Perhaps at the same time the IASB will release those parts of IAS 32 and 39 which it has by then finalised.
Later in 2004, the IASB hopes to publish new standards on reporting financial performance, pensions, purchase accounting and government grants, together with further material on the disclosure of financial instruments. None of these standards is intended to be mandatory for 2005. They should, however, be available for early implementation, thus allowing companies which want to ease the burden of substantial change in both 2005 and 2006 to effect one major transition in 2005.
For those UK companies which will not be using the IASB’s standards directly, the ASB will this autumn be considering how best to achieve a convergence of UK standards with those of the IASB. More of this in due course.
Meanwhile, it is important to remember that, in Europe, publication of the IASB’s standards is not the end of the process. The European Regulation mandates listed companies to apply EU ‘adopted’ international accounting standards. Adoption involves consideration of the IASB’s standards by the Accounting Regulatory Committee (ARC) of member state governments. For obvious reasons, this Committee has yet to consider the many standards not yet published.
It is to be hoped that, once the IASB has concluded its deliberations on each topic, Europe’s governments will give swift attention to the adoption process, so that there is no risk that our listed companies will have less than a full and up-to-date set of standards ready for use in 2005.
