IFRS Standards
The Netherlands: a successful transition despite scepticism

Overview

Dutch companies have taken IFRS conversion very seriously and are well prepared: 95% declare themselves fully prepared, thus placing themselves second in Europe just behind Germany. An opening IFRS balance sheet is prepared in almost all cases (92%), and preparation of simulated 2004 financial statements is well advanced (69%, slightly higher than the European average).

38% consider the cost of conversion to be high, less than the European average (45%), doubtless expressing a higher rate of readiness on the part of both companies and regulatory bodies.



Investor communication

Concerning communication with shareholders, the Netherlands share the lead with Germany, as almost 80% of listed Dutch companies (compared to 58% in Europe) have already communicated the impact of IFRS, three quarters of them with quantified information.

Of those companies who have not yet done so, 70% intend to carry out communication before June 2005. The communication effort by Dutch companies is thus both broad and timely.

Dutch companies' readiness for IFRS is further shown by their intention of issuing their annual reports (at a rate of 92%) on the same date as last year.

Paradoxically, Dutch companies are relatively pessimistic regarding the ability of the new standards to improve understanding and transparency of financial statements (28%, close to the French rate of 25% which is the lowest in Europe). Similarly, barely over half of companies surveyed believe the standards will increase comparability of accounts. This rate is well below the average for European companies (63%). There is no denying a certain level of scepticism as to the ability of the new standards to meet their stated goals.


Employee training and readiness

If the Netherlands are perfectly prepared for transition to IFRS, this is to a great extent thanks to the excellent knowledge possessed by their finance teams, with 95% of companies surveyed (compared to 75% in Europe) considered to have good or excellent knowledge. These results are not explained only by superior training, but also by massive recourse to external consulting services (in almost three quarters of companies, compared to less than 60% across Europe). It is therefore not surprising that internal teams are among the smallest in Europe (4 employees, of which half contain two or less persons), which is similar to team sizes in Belgium and Luxembourg.




Financial impact

The Netherlands predicted fairly successfully the impact of the IFRS conversion ; for more than 60% this impact corresponded to expectations. However, Dutch companies are among the most concerned about increased volatility resulting from the application of the new standards.

Dutch companies have not changed their management of financial operations (76%). The standards are adopted because they are required, but they are not bringing about a revolution in the Netherlands.


Specific standards

It is the area of financial instruments which poses the greatest challenge to Dutch companies (40% of respondents). Employee benefits and pensions are also cited as a major issue. In this area the Netherlands stand out clearly from the other countries surveyed.

For one quarter of companies who changed their management of financial operations, over 50% did so in the areas presenting the most challenges, that is financial instruments and employee benefits and pensions.

Dutch companies deny (76%) that application of IFRS will increase scope for interpretation. However, 80% would welcome continued input regarding interpretation, as has been their habit for their national standards.

Concerning the hypothetical adoption of alternative standards, Dutch companies make their position clear. They would support neither European (14% in favour) nor American standards (3% in favour).



Finally, with only 8% of companies not intending to adopt IFRS for their domestic accounts in the short or the long term, the Netherlands confirm their broad support for IFRS.