Grant Thornton has spoken out against a call by the Institute of Chartered Accountants England and Wales (ICAEW) for a single date approach to implementing new IFRSs.
Grant Thornton International executive director of international financial reporting Andrew Watchman said while the network acknowledges the argument for a single date approach – such as less disruption in accounting policies and a reduction in costs – it prefers a phased approach.
“They are important arguments but we think those effects can be mitigated through good disclosure, as companies are leading up to making the changes and once they have made the changes mitigating the comparability effect,” Watchman told the International Accounting Bulletin.
The ICAEW says making all the new IFRSs scheduled for completion this year effective in one go is the most efficient option for both users and preparers of financial reports.
“There is an avalanche of changes to IFRSs heading our way. There will be a steep learning curve for both businesses preparing financial reports and the users of these reports, and inevitably there will be demands on the resources of the hard-pressed finance function,” ICAEW financial reporting faculty head Nigel Sleigh-Johnson said.
Sleigh-Johnson thinks the transition to the new and revised requirements will be smoother if the International Accounting Standards Board (IASB) made them all effective from a single date, rather than through a phased approach.
Watchman does however warn that a single date approach comes at a price.
“Firstly to achieve those benefits of minimising the period of discontinuity you really need to prohibit early adoption and if you do that companies won’t have flexibility any longer to actually develop there own implementation plan,” Watchman explained.
“Because everything has to happen on one date, that date has to be some way off into the future which means changes and improvements that could be made more quickly actually get pushed out because there packaged up with other more complex IFRSs that take more time to implement.”
An example is the new standard on consolidation expected from the IASB by March. According to Watchman the standard is partly in response to the financial crisis and he believes there should not be a delay for those improvements to make it to market.
Improvements have been made to IFRSs and after enough time has lapsed for companies to have made an orderly and efficient preparation for the change, including communicating with their investor community and other users, they are put out in the market place, Watchman said.
“If these standards are not improvements they shouldn’t be happening at all. If they are improvements they should be happening, implemented as soon as is practicable taking into account different levels of complexity and giving companies enough time to make an orderly and efficient transition,” Watchman added.
The ICAEW said the new standards due for completion in 2011 – including financial instruments, insurance and leasing – should be made mandatory no earlier than in 2015 to allow for a minimum three-year transition period.