The Impact of the Current Changeover from Uk Gaap to Ifrs on the Performance and Financial Position of Kingfisher Plc.
This year 's preliminary results season has been something of a landmark. Last year was to be the last reporting period where listed companies presented their results according to UK generally accepted accounting principles (GAAP). After that, they would be required to use international financial reporting standards (IFRS) to prepare their consolidated financial statements for accounting periods commencing on or after 1st January 2005 (http://search.ft.com, 2004). The requirement to adopt IFRS applies only to those companies that are active direct participants in the capital market (i.e. those that have securities that are publicly traded on recognised stock markets). There are estimated to be about 7,000 such companies in the EU, of whom 2,500 are in the UK (www.accountancyage.com, 2004).
The rules are changing for two main reasons. The investors chronicle seeks to explain this first by suggesting that in the wake of accounting scandals in both Europe and the US, regulators want greater convergence between standards. Listed company accounts in the UK and US exist primarily for the benefit of shareholders. Conversely, in parts of Europe, the banking system has historically been the main provider of finance to industry, so company accounts have evolved with creditors in mind. In some European countries it will bring fundamental change, particularly where medium-sized companies have traditionally had closer relationships with their banks than with their shareholders. As a result, their financial statements have tended to be more conservative, and placed greater emphasis on assets. Harmonising the two systems so that there is greater convergence between European and non-European conventions is what IFRS is partly about. ' (http://search.ft.com/, 2004) The other aim is to keep abreast of the growing popularity of options and derivatives. Current accounting practices originated in the 16th century, and were significantly updated in the 19th century. Things were
The rules are changing for two main reasons. The investors chronicle seeks to explain this first by suggesting that in the wake of accounting scandals in both Europe and the US, regulators want greater convergence between standards. Listed company accounts in the UK and US exist primarily for the benefit of shareholders. Conversely, in parts of Europe, the banking system has historically been the main provider of finance to industry, so company accounts have evolved with creditors in mind. In some European countries it will bring fundamental change, particularly where medium-sized companies have traditionally had closer relationships with their banks than with their shareholders. As a result, their financial statements have tended to be more conservative, and placed greater emphasis on assets. Harmonising the two systems so that there is greater convergence between European and non-European conventions is what IFRS is partly about. ' (http://search.ft.com/, 2004) The other aim is to keep abreast of the growing popularity of options and derivatives. Current accounting practices originated in the 16th century, and were significantly updated in the 19th century. Things were
References: Accountancy Age (May 27th 2004) ‘International Accounting Standards - the basics ' http://www.accountancyage.com/features/1137212, downloaded as at 6th April 2005. CIPFA (2004) ‘Accounting Panel ' http://www.cipfa.org.uk/panels/accounting/show.cfm?news_id=20148, downloaded as at 18th Feb 2005. Investors Chronicle (November 5th 2004) ‘Raising the standard ' http://search.ft.com/search/article.html, downloaded as at 3rd April 2005. Margerison, J. (2005) Lecture Notes, Financial Reporting; Nottingham University Business School. Margerison, J. (2005) The International Accounting Standards –What 's it all about? '; Nottingham University Business School. Mazars (2004) ‘ias-ifrs: united kingdom ' http://www.mazars.com/news/ias_ifrs_uk.php, downloaded as at 17th Feb 2005. Reuters UK (March 17th 2005) ‘Kingfisher PLC - IFRS Impact ' http://investing.reuters.co.uk/stocks/QuoteCompanyNewsArticle.aspx?view=PR&symbol=KGF.L&storyID=120935+17-Mar-2005+RNS, downloaded as at 5th April 2005. The Economist (December 28th 2004) ‘all together now ' http://economist.com/agenda/displayStory.cfm?story_id=3493407, downloaded as at 17th Feb 2005.