Rating agency Moody's Investors Service has detailed the effects it expects to see on European corporate credit ratings from the introduction of International Accounting Standards in January next year.
Although overall Moody's expects IAS not to have a major effect on most companies' ratings, in specific cases the impact will be dramatic. One example the agency gives is Swiss agrochemicals company Syngenta, which Moody's said will see IAS39 increase the reported liability of one of its bonds by nearly 50%, from $677 million to more than $1 billion.
Rival rating agency Standard & Poor's reached similar conclusions in its report on the impact of IAS in March, while Fitch had a different spin in July, warning that a company's ability to engage in M&A activity would be the hardest hit area by the increase in reporting volatility under IAS39.
Moody's spelt out several factors that could affect a company's rating, including:
? Disclosures of risks not previously evident;
? Changing market perception of the issuer;
? Breaching banking covenants with restated figures;
? Regulatory impact of clampdowns on revealed risk; and,
? Changes by the issuer in its approach to managing risk and issuing different instruments.