If this were the year 2055, would we be writing about the 6,377th amendment to IFRS no. 234? An exaggeration perhaps, but lately we seem to be bombarded by revisions to standards and new directives. A recent example is the EU revision to the Auditing Directive, meaning a more flexible approach will be taken to audit regulation.
In this month’s Risk Management article we review how different accounting standards and frameworks – such as SFAS (Statement of Financial Accounting Standards), IAS (International Accounting Standards) and IFRS (International Financial Reporting Standards) – affect how hedged translation risk exposures are recorded in the company accounts. In Finance A to Z, we include a list of all the relevant bodies, standards and frameworks relating to FX hedging requirements. While compiling this list we were reminded of how many different standard/framework setters and advisors there are in the world – relating not just to hedging, but to all aspects of accountancy and finance.
The Enron scandal may have been the original catalyst for tightening accounting controls, but the momentum for change is being driven forward by other forces – namely the many advisory bodies and standard/framework setters around the globe. With so many, it is no wonder corporates find it a challenge to keep up-to-date with accounting requirements.
Of course, broadly speaking these different bodies have one mutual aim – to make accounting and business in general more transparent and therefore more scrupulous and reliable. However, in order to arrive at this end goal, the individual desires of each association also have to be taken into account. This probably means we are a long way off a universal framework for accounting standards, particularly with regard to IFRS becoming the authority for accounting standards in all countries – including the United States.
This year, quoted companies outside the US have grappled with meeting the 2005 deadline for reporting under IFRS requirements. From 1st January 2006, there will be new additions to these requirements – for example, meeting the amended IAS 19 in relation to employee benefits.
We will continue to keep you up-to-date with any changes or new additions to the standards. In the meantime, companies will be focusing on the present and making their 2005 accounts meet the current IFRS requirements. At the end of 2005, there will probably be a huge sigh of relief at getting over the first major IFRS hurdle, followed by concern about what may come next.