Accounting change on the way..

These days, trust, credit and cash flow are all in short supply in the corporate world.
Smaller enterprises have been affected in particular by the breakdown in financial connections

Firms can do themselves a big favour with their suppliers and financiers where they can prove to everyone’s satsifaction that their accounts present a full and fair picture of the state of the Company.
Writing recently in Finance Dublin, Brendan Sheridan of Deloittes observes that “disclosures should be more detailed than in times of economic growth.”
He notes that the UK Financial Reporting Review Panel recently reviewed 326 financial statements. It found that “the current standard of reporting remains good, with evidence of continuing improvement.” However, it drew attention to a number of areas including principal risk, liquidity and asset impairment as areas requiring particular attention.
As Mr Sheridan observes : “the robustness  of corporate strategies and the fundamental assumptions on which financial statements are produced have been significantly tested and questions do exist as to whether the marketplace has been adequately informed regarding the extent of change that this has brought about.”

The International Accounting Standards Board, meanwhile, is on course to introduce simplified accounting standards for SMEs. The new regime will seek to take account of the fact that users of SME financial statements are more interested in current liquidity issues, and short term cash flows than in longer term forecasts.

PriceWaterhouseCooper has produced an interesting analysis.

According to PWC, under current proposals from the accounting standards board, the current Irish and UK reporting regime may case to exist by 2012.
It warns that the new regime, or IFRS ( international reporting standard ) for SMEs could present a challenge ( not to mention plenty of new opportunities for accountancy firms.
Under IFRS, for example, firms will no longer have an opportunity to revalue tangible fixed assets in their accounts. There will be increased recognition of intenglible assets while the requirement to present cash flow statements will be extended to all companies ( under the current rules, an exemption applies to 90% plus subdidiaires. )
Written by Kyran Fitzgerald