A major study by the KPMG International Financial Reporting Group (IFRG) of nearly 200 companies in 16 countries has found that approaches taken in the application of International Financial Reporting Standards (IFRSs) are influenced primarily by a company’s country of domicile and its previous national accounting standards, rather than by its industry. With the exception of financial institutions, according to KPMG’s research, cross-border industry consistency lags as a secondary influence.
As a result, the financial statements of a Spanish retailer and a Spanish pharmaceutical company, for example, are likely to be more similar in their accounting choices than the financial statements of a retailer based in Spain and one based in France.
But KPMG IFRG predicts that, in the future, as analysts look at industries on a regional or global basis rather than solely within a country, pressure will grow for companies within that industry to move to common accounting practices and presentations – even if their current practices are more typical for companies in their country.
“Perhaps as expected, the first post-2005 generation of IFRS financial statements show their lineage – of previous national standards, training and culture,” Mary Tokar, Head of the KPMG International Financial Reporting Group, said. “But companies will be pressured to move forward. There is an opportunity now to look at competitors and comparators. Companies will discover that it is informative to look at their financial statements and ask – are we the odd one out? What can we learn by benchmarking ourselves against competitors from other countries?”
The KPMG study consists of a survey of the application choices made by 199 companies across 26 explicit options offered by IFRSs (The Application of IFRS: Choices in Practice), produced in collaboration with Prof. Dr. Isabel von Keitz of the University of Applied Sciences Münster, Germany, and KPMG in Germany, and a comprehensive review of the disclosures made (The Application of IFRS: Disclosures in Practice), in financial statements for a period ending on or after 30 June 2005. The majority of companies had a balance sheet date of 31 December 2005. The survey is available at www.kpmgifrg.com.
Commenting on trends in the UK, Andrew Vials, head of KPMG in the UK’s technical accounting group, said: “The influence of previous GAAP on transition to IFRS is certainly evident in the UK environment, particularly in the way companies accounted for joint ventures, investment properties and actuarial gains and losses on pensions. Interestingly, however, UK companies presented the analysis of their expenses in the income statement in a variety of ways, more so than in other countries where there was generally more uniformity – indicating that UK companies made a proactive choice for the method which suited them best.”
Mary Tokar concluded: “The first massive wave of conversions to IFRSs is over – but it’s clear that the job is not done yet. As companies settle into life under IFRSs, the drive for global consistency – of standards and their interpretation – will enter into a new stage. We expect market pressures to push for consistency within industries across national boundaries, which should become less relevant for IFRS purposes.”
-ENDS-
Further information:
Mark Hamilton, KPMG LLP’s (U.K) Press Office
Tel: 020 7694 2687 or 07785 337672
mark.hamilton@kpmg.co.uk
Notes to editors:
Companies included in KPMG’s study were based in France (20), Germany (20), Hong Kong (20), Italy (14), Netherlands (19), South Africa (14), Spain (20), Sweden (20), Switzerland (20) and the UK (20), as well as 12 further companies from Austria, Belgium, Denmark, Finland, Luxembourg and Norway.
KPMG International Financial Reporting Group is a part of KPMG IFRG Limited.
