An Executive Guide to IFRS: Content, Costs and Benefits to Business

Accounting policies and changes

IAS 1 Presentation of Financial Statements says that companies should present a full discussion of accounting policies and this would normally start with an ‘explicit and unreserved statement’ of compliance with IFRS, which is then followed by a presentation of the significant accounting policy choices made.

The ‘explicit and unreserved statement’ is a controversial issue that has a lot of baggage. In the 1990s some companies, particularly French ones, used to comply only with selected standards. They used to specify that their statements were drawn up in compliance with international standards – but with exceptions. Frequently they did not comply with the pensions’ standard (IAS 19) and many did not make the disclosures of the remuneration of key personnel mandated by IAS 24. Such usage came to be referred to as ‘IAS lite’ and was considered to bring the international standards into disrepute. IAS 1 was therefore reformulated at the end of the decade to include this requirement that an entity could only refer to international standards if it was in full compliance and made an explicit and unreserved statement to that effect.

However, the situation was then complicated by the EU. For IFRS to be mandatory in the EU, they have to be voted into European law. This unfortunately provides an opportunity for entities that are not happy with a particular standard to try to persuade participants in the EU endorsement system to delete parts of the standard ...