INTERNATIONAL FINANCIAL REPORTING STANDARDS

Difficulties smaller companies are facing in the implementation of IFRS

The AICD remains concerned about the impact the decision to implement IFRS will have on smaller listed companies and unlisted reporting entities.

A number of companies below the Top 300 listed companies have struggled to meet the January 2005 deadline due to a lack of resources and limited access to external advice due to the high level of demand for assistance from larger accounting firms.

Other concerns are that the implementation is required during the same year as the introduction of the new standards, which is unprecedented. Australia is the only country making the transition this year and applying the standards to all listed companies and unlisted reporting entities.

The AICD is concerned that smaller companies fail to secure any of the key benefits of IFRS, including easier access to international capital markets (especially unlisted reporting entities). The practical difficulties around understanding the intricacies of the new accounting standards are only emerging as companies begin implementing the standards.

Options to provide relief to smaller companies in the implementation of IFRS

The AICD believes smaller companies would benefit from relief provided via three options:

1. The introduction of a one year deferment of comparatives for companies below the Top 300 listed and for all unlisted reporting entities. This solution has the benefit of ‘self correcting’ after the first year in that companies will provide comparatives one year later than previously contemplated. December balancing companies will have ‘caught up’ by 1 January 2006 and June balancing companies by 30 June 2006 .

2. The lifting of ASIC’s restriction on smaller companies on the use of their audit firm to also provide assistance in implementing IFRS. The removal of this restriction would reflect the reality of what many companies are currently being forced to do simply to meet the IFRS deadline of January 1 2005 .

3. Deferring the introduction of IFRS entirely for a minimum of twelve months for companies below the Top 300 listed companies and unlisted reporting entities. Smaller companies gain minimal benefits if any at all from aligning with IFRS and do not have the internal resources available to manage the implementation by January 2005.