IFRS Standards
United Kingdom and Ireland: continuity and conversion

Note: To ensure statistically meaningful samples, the Irish companies' responses were aggregated with those of British firms.

Overview

An important first point is that both these countries stand out from their European counterparts in terms of their year-end, which occurs on 31 December for only 50% of companies, compared to 87% in Europe. This no doubt explains why these companies are slightly below the European average in terms of preparation level (84% versus 88%) and the simulation of 2004 financial statements (54%), and only near the average with regard to the preparation of their opening IFRS balance sheet (75%).



However, the UK and Ireland are the only countries in which the overwhelming majority of companies (83% compared to 66%) do not find the conversion to constitute a major cost.








Investor communication

Even though companies in these countries are the most advanced in terms of shareholder communication, they lag behind the rest of Europe for communicating on IFRS, as only 47% have communicated their quantified impact of the new standards.



British and Irish companies already applied accounting standards geared towards financial markets. Transition to IFRS is thus rarely seen as a means to increase transparency (27% compared to almost 50% in Europe), and only half of these companies see IFRS as facilitating comparability between countries.







Employee training and readiness

100% of British and Irish companies (undisputed leaders in Europe) consider their finance teams to be sufficiently trained in IFRS; 88% are declared to have excellent knowledge of the new standards. This superb performance is due in particular to the training programmes put in place by over 88% of companies, compared to 73% across Europe.

These companies preferred internal management of their conversion projects at a rate of over 50%, which explains the systematic nature of the training provided: 90% of companies who did not externalise their project provided employee training.


Financial impact

Companies in the U.K. and Ireland accurately anticipated the impact of transition (more than 61%), and are not very concerned about increased volatility which could be caused by the new standards.

Although most British and Irish companies consider the cost of IFRS conversion to be low, only 44% consider it justified; this rate is still within the upper range among European countries.


Specific standards

Over 45% of British and Irish companies believe financial instruments standards (IAS 32 and 39) pose the greatest challenge, with share-based payments (IFRS 2) the second main area of difficulty.





Companies in the UK and Ireland in no way plan to change their management of financial operations (91%), and those few who do will make changes in the area of financial instruments.






Similar to Germany, few British and Irish companies (32% compared to 43% in Europe) believe the margin for interpretation has increased with the implementation of IFRS. It is thus logical that only 46%, compared to 59% in europe, would like further interpretation by IFRIC.

Along with Italy and Spain, British and Irish companies are the only ones to state at a rate of over 50% (55%) that the new standards are well adapted to their business sector, and the other 45% are among the most likely in Europe (70%) to wish for more guidance for their sector.



Companies in the UK and Ireland are also the most numerous to categorically reject the idea of European Union standards, while 16% would have supported the introduction of U.S. GAAP. They are not the strongest supporters of this latter alternative, in contrast to what might have been expected.




Finally, British and Irish companies are close to the European average in their plans to apply IFRS in their national accounts. 32% have already done so, 42% plan to in the short or long run and 26% do not plan to make this switch.