We came across an article recently which suggests that due to the prescriptive nature of IFRS, companies are adding alternative reporting to annual reports and other corporate communication. Read it here
Essentially, the complaint is that IFRS is so prescriptive that it doesn't allow us the freedom to represent ourselves in a way we think reflects our real performance. If true that's a pretty serious complaint. Some accountants argue that should only be one rule: that the accounts must represent a true and fair view of the company's performance. The trouble is that they all do that differently so investors don't know how to compare.
Surely it is reasonable for all sorts of stakeholders to want to compare the performance of one company against that of another. That is increasingly difficult as more and more companies operate internationally. Technology advances, global infrastructure and the increasingly inter-connected world we live in means that smaller companies can compete in international markets. Indeed, as I write this blog, I am being very careful to explain my point in a way that includes readers from any country. So IFRS, providing a standard approach internationally, is a big advantage. But not for the company that is currently reporting under its own country's rules and has accounting policies and treatments designed to work under that framework. Standard setters would never believe that a company would design their policies to work for the standards, but they massively affect decisions. "If we lease this rather than buy it, it doesn't need to appear on our balance sheet etc etc" then that changes and what they have done looks dumb.
Companies complain of lack of flexibility but what they mean is that the rules don't fit what they do, probably because those policies were developed under a different regime. To my mind it's not the standards that cause the problem, it's changing from one regime to another.
What do you think?
Surely it is reasonable for all sorts of stakeholders to want to compare the performance of one company against that of another. That is increasingly difficult as more and more companies operate internationally. Technology advances, global infrastructure and the increasingly inter-connected world we live in means that smaller companies can compete in international markets. Indeed, as I write this blog, I am being very careful to explain my point in a way that includes readers from any country. So IFRS, providing a standard approach internationally, is a big advantage. But not for the company that is currently reporting under its own country's rules and has accounting policies and treatments designed to work under that framework. Standard setters would never believe that a company would design their policies to work for the standards, but they massively affect decisions. "If we lease this rather than buy it, it doesn't need to appear on our balance sheet etc etc" then that changes and what they have done looks dumb.
Companies complain of lack of flexibility but what they mean is that the rules don't fit what they do, probably because those policies were developed under a different regime. To my mind it's not the standards that cause the problem, it's changing from one regime to another.
What do you think?
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