Implementation of international financial reporting standards (IFRS)‎ as a requirement for standardized reporting of financial results : a desk study on UK companies

الملخص EN

The rapid globalization of the world’s economy has fuelled the desire to have common international financial reporting standards that could be understood and followed across nations.

In addition, the ever increasing network of investors has not only opened new financing sources to business and industry, but has also put some pressure on the financial regulatory authorities to design and improve their financial reporting systems in a manner that could be easily understood by a wider audience.

The adoption of the international financial reporting standards (IFRS) on 1st January 2005 across the European Union member states is one of the major events in the accounting history.

This is especially important after the capital markets were badly hit by a number of accounting frauds in recent years.

The adoption of IFRS across the European Union from 1st January 2005 is a defining movement which will have an immediate impact on more than 7000 listed European companies which will have to implement the new financial reporting standards first.

Common international financial reporting standards could result in true global capital markets.

Adopting common financial reports standards will also help in achieving a true scale of financial integration.

It is understood that it will be difficult to design an accounting system that meets everyone’s demands.

However, the UK listed companies have to implement the IFRS standards for accounting periods starting from 1 January 2005.

Unlisted companies have been given time till 2007 to implement IFRS.

The standards that UK listed companies will follow are not those issued directly by the International Accounting Standards Board, but are those that have been endorsed by the European Commission.

Both IFRS and UK GAAP share broader level aims.

But there are many differences at the implementation level.

IFRS further enhances the concept of fair value and its regulations place stiff definitions on assets and liabilities.

Pension deficits would now be disclosed on the income statements.

Financial instruments would also undergo finer scrutiny.

This may lead to some volatility in financial statements.