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From the pen ....

To IFRS or not to IFRS… that is the question

IFRSs have come under a barrage of criticism of late. Either their application is misunderstood or, as our Executive President, Ignatius Sehoole, points out '… it (is) a way of explaining why (company) results have not met expectations, (and) it is also a fine decoy for focusing attention away from more sensitive corporate issues". Sehoole also adds that it is particularly "perplexing to see that companies do this every year".

"Every year" – that's quite an interesting thought – for me, anyway. Because, while we agree that IFRSs are complex and have caused some consternation in implementation, they have been around for some time. And while there are many companies that have successfully adopted and complied with these standards, some seem unwilling to grasp their essential importance in the context of financial reporting in South Africa.

So what's the real problem? Well, Mr Sehoole alluded to some of the reasons behind the slough of criticism IFRSs have time-and–again come under. Basically, as the ASA team itself has debated, IFRSs call for some kind of international conformity in reporting your company's financial performance. But the criticism is that IFRSs leave little room for interpreting your company earnings, profits or losses. What then is the real reason for questioning the implementation of IFRSs?

Surely the often incomprehensible nature of the standards must bear some responsibility. Similarly, the cost of training together with the implementation of new processes and systems must also share some of the responsibility. The question of what actually constitutes economic reality in company performance further fans the debate.

There is definitely some validity to the market criticisms, even when lodged around the year-end reporting process. But at the end of the day, IFRSs must be adopted and complied with, so that we do begin to reflect a standard global reporting system.

This is an absolutely essential requirement if we are to attract investment and fully participate in world capital markets, so that we yield maximum benefit for all our people of South Africa.

But, despite this, the debate will continue, doubtless interminably. So please look out for the second instalment of our special feature next month on the pros and cons of IFRSs.

Raina
Editor

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