Treasury Today Country Profiles in association with Citi
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June 2004

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How much is too much?

As an article in Treasury and Finance News shows, the majority of European treasurers now view the adoption of International Accounting Standards as their number one priority.

The uncertainty over the nature, scope and requirements of the infamous IAS 39 remains, with continual revisions to the standard making it very difficult for treasurers to plan to adopt the required working practices.

This is also a problem for the accounting firms. The pressure of time on implementation process means that advice from IAS 39 experts is at a premium. The continual change has also meant that a number of companies which might otherwise have been ‘early adopters’ have delayed implementation of IAS.

The real pressure point will come when auditors are required to sign their clients’ accounts. Because of the various corporate scandals, the remaining audit firms know they are under increased scrutiny. They will want to make doubly sure the new standards have been adopted correctly before signing the accounts. The problem is again time and expertise. It is difficult for auditors to understand what to look for if the IAS goalposts continue to move.

There is a point at which the need to comply with corporate governance rules will become self-defeating. European companies are being forced to divert time and resource to comply with increasingly complex standards. These are resources which could be used to meet the challenges from their competitors.

If this becomes too much, European company boards may find they are directing well-run organisations in which every transaction is accounted for in a transparent manner. The problem will be that the companies themselves will be disappearing under an impossible administrative workload. Surely, at some point, those in charge will have to be trusted to do what they should be doing.