IFRS Standards
European outlook: major trends

An uncertain transition phase

The stakes involved in adopting IFRS are generally recognised today by the finance and accounting community. However, in the eyes of European companies, the need to apply these principles is not always perceived as a positive evolution of international accounting standards.


In particular, the results of the 2005 Mazars survey show that only 63% of European companies believe that the new standards will facilitate comparison of financial statements, and less than half believe they will enhance transparency. As these two points represent the principal arguments in favour of the new standards, it appears that not all companies have been persuaded that the chosen system of reference, namely IFRS meets these objectives.




It should be noted, however, in favour of IFRS, that European companies do not want to abandon these Standards in favour of either the creation of specifically European standards (73%) or U.S. GAAP (86%).



Would you have preferred to use US Standards instead of IFRS?

In addition, 55% of companies surveyed refute one of the main criticisms made of IFRS, that of increased volatility of reporting. Finally, 55% of companies plan to use IFRS in their domestic accounting.



Companies' perceptions of the value of the new accounting standards appear to have little or no influence on their dedication to the changeover project.

87% of listed companies consider themselves wellprepared for the adoption of IFRS. This number reflects a subjective evaluation which is usefully compared to more factual data: 74% and 66% of companies have, respectively, prepared their IFRS opening balance sheets and completed a simulation of 2004 financial statements under the new standards.



87% of listed companies consider themselves wellprepared for the adoption of IFRS. This number reflects a subjective evaluation which is usefully compared to more factual data: 74% and 66% of companies have, respectively, prepared their IFRS opening balance sheets and completed a simulation of 2004 financial statements under the new standards.




If you are adopting IFRS for the first time in 2005/06 have you already prepared your opening IFRS balance sheet?








Considering the end date of the survey (15 April 2005) and the fact that some companies' year-end is not 31 December, these observations are positive and indicate a smooth transition for the 2005 financial year.

It is interesting to note that, in those areas where IFRS 1 'First-time adoption of International Financial Reporting Standards' provides options to companies, almost half do not yet know which options they plan to apply. Nevertheless, many companies have chosen to use the exceptions, thereby facilitating their transition process.


Has conversion to IFRS been a major cost to your enterprise?



Concerning the cost of conversion, only 45% of European companies consider it to be high and 55% believe that the benefits of conversion justify the costs.








55% of companies interviewed believe they have correctly anticipated the effects of the transition. However, the perceived impact, in terms of increased or decreased net equity and net income, is quite variable and shows no strong trend in any one direction.

The financial impact of the changeover to IFRS on net equity and net income appears to be affected by neither the company's country of origin nor its sector of activity. Across categories, companies anticipate positive impacts as often as negative effects on these numbers.

Further effort would thus seem advisable to facilitate the new standards' practical application: 59% of companies surveyed would welcome more interpretation from IFRIC and 50% find that the new standards are not well adapted to their own sector and would like to see more complete sector guidance.




We observe here similar conflicting perceptions. The majority of companies recognise that IFRS brings accounting practises closer to economic substance. However, the two most common criticisms relate to the complexity of the new standards and thus also the amount of work needed to correctly apply them.