IFRS Standards
Belgium and Luxembourg: An early but forced conversion

Note: To ensure statistically meaningful samples, the responses of the Luxembourg companies were aggregated with the Belgian firms.

Overview

Four Belgian or Luxembourg companies in five feel ready for the transition to the new accounting standards. This rate is somewhat below the European average (86%). They have in general prepared their IFRS opening balance sheets (79% of companies), in contrast to the simulation of 2004 financial statements, prepared by only 51% of companies.






The cost of conversion is considered to be high by 60% of companies in these two countries, and 55% do not consider this expense justified.








Investor communication

64% of companies have already begun communication with their shareholders. As a percentage of those companies who consider themselves ready for the conversion, Belgium and Luxembourg are well ahead of the European average. Such communication is almost exclusively carried out by companies who consider themselves prepared for conversion, which explains the high rate of quantified information available (81%).

Companies who have not yet communicated the impact of applying IFRS are motivated to begin soon, as 68% plan to undertake this before the month of June.


Employee training and preparedness




The use of external consultants was limited, with 52% of companies calling on outside consultants for certain aspects of conversion, while only 3% fully externalised the project. In addition, the number of employees working on IFRS conversion is low: 52% of companies assigned only one or two employees. Companies in these countries appear to have chosen a long-term approach using smaller teams.
















Financial impact

60% of companies rated the impact of conversion “as expected”. This percentage is one of the highest in all the countries surveyed.

Volatility caused by the new standards is an issue for 55% of companies. These same companies believe that IFRS will tend to cause an increase in net equity and net income.

However, only one third of companies have decided to revise their performance measures under the new standards which is slightly less than the average in Europe.

Belgians and Luxembourgers are relatively unconvinced of the benefits of the new standards: 39% believe they will improve transparency, versus 28% who hold an opposing opinion, and 45% think they will aid comparisons while 19% disagree. Companies in these two countries thus expressed limited enthusiasm, as the European average is systematically higher.

Specific standards

Belgium and Luxemburg are in sync with European trends, in that financial instruments is ranked the most challenging area by 44% of companies. Fixed assets as well as employee benefits and pensions are the nexthighest ranking areas.

Consistent with the half-hearted support for the new standards in the Belgian and Luxembourg business communities, only 20% of companies have modified their management of financial operations. These companies are principally in the finance sector.

Companies exhibit a wait-and-see attitude when it comes to the IFRS 1 options: 42% do not yet know which options they will apply.

Only 38% of those surveyed believe that the margin for interpretation is greater with the new standards: this is lower than the European average of over 40%. As could be expected therefore, these companies do not seek greater intervention from the IFRIC, with only 35% welcoming further interpretation.

Companies are divided regarding the applicability of IFRS to different sectors: 53% are satisfied with the standards in their own sector. This is about equal to the European average. There is significant desire for more sector guidance, however, with 57% of respondents stating that the standards are not well-adapted to their sector and wishing for further interpretation.

A preference for strictly European standards is shown by 30% of companies, which is a higher rate than average. U.S. GAAP would only interest 5% of those surveyed and is thus not seen as a viable alternative.