In less than six months’ time IAS 39, one of the most controversial accounting standards to date, will hit Europe’s listed companies. There are practical implications of IAS 39 for corporates, from hedging balance sheets at a macro level to appropriately calculating the carry amount of assets, liabilities and derivatives. But how are CFOs reacting to the impending deadline? A recent report published by KPMG provides some answers.
Jon Symonds, CFO of AstraZeneca, argues UK companies are well-prepared: “Large UK companies have crossed the Rubicon,” he says. “They all have their IAS projects under way and will be very fed up if, for any reason, it doesn’t happen.” His main worry is that uncertainty will linger for too long. “The big question is: will it all be clear in time as to what the rules will be? We are already beyond the eleventh hour.” It is clear that there are still many different views on several key issues regarding IAS 39, including its timing, and more importantly the extent to which capital markets will understand and adapt to the changes that will inevitably arise.
As John Coombe CFO of GlaxoSmithKline points out, there is a need to “get the analysts thinking about 2005 well ahead of time.” Nevertheless, he is positive about the IAS 2005 process: “What I hope will happen is that the EC will endorse the standards and we will move smoothly and seriously to implementation.”
One man who thinks analysts are behind the curve is Jan Hommen, CFO of Phillips, who comments: “Analysts know and understand little about international accounting standards so they are not ready to see the changes which are coming.”
One reason for the differing attitudes toward IAS 39 stem from the different country-to-country approaches across Europe. “For companies in countries like the UK and in Scandinavia where convergence with the former International Accounting Standards Board’s (IASB) standards has been a priority, for example, change from existing standards wouldn’t be that dramatic,” said Sir. David Tweedie, chairman of the IASB. “The trouble will be where people have not used standards similar to international ones. However, the short term disruption should be more than compensated by the long-term gain.”
