Posted: 2005-04-05 23:54 Will SA companies be compliant?  Presenter: Lindsay Williams Guest(s): Gareth Blaydon An Ernst & Young survey says about 41% of JSE Securities Exchange listed companies sampled conceded they are lagging behind in implementing International Financial Reporting Standards (IFRS). With Gareth Blaydon from Ernst & Young LINDSAY WILLIAMS: As we become part of the global investment community we have to adhere to international standards. What are the implications for the JSE? For share prices? For the economy? GARETH BLAYDON: A number of years ago the International Accounting Standards Board embarked on a project to harmonise global Generally Accepted Accounting Principles (GAAP), and develop a single global standard that could be used to enhance comparability for financial statements throughout the world in response to a global environment to make doing business throughout the world a little bit easier - we would all be reporting on the same financial accounting systems - the IFRS. LINDSAY WILLIAMS: We list our companies on overseas exchanges, therefore, the theory is that as everybody becomes part of the global investment community we will have to adhere to the same standards. What is disturbing about this, of course, is that 41% say they are lagging behind, and 96% say they are not on track for reporting their interim results. What is the date for them to adhere to IFRS? GARETH BLAYDON: The JSE, as of financial years starting on 1 January 2005, requires that all companies must produce their financial statements in line with IFRS. Ernst & Young has developed a generic term called IRFS 2005 - made up of all the international standards, and the latest IFRS standards. Companies are going to have to produce the interim results - if their financial year started after 1 January 2005 - under IFRS. There seems to be a little bit of sloppy behaviour on that front, but we are quite confident - despite the rather shocking figure of 96% not quite being on track - that companies will be able to pull it out of the bag. The media and the marketplace were very critical when AC133 was released - a lot of people said the companies just wouldn’t be able to put it into play - but everybody was proven wrong, and the companies came to the party. We feel that the same situation will arise from IFRS - it is going to be a bit of a tight squeeze, but we do have faith in the marketplace. Generally, South African managers are very responsible, and we think they will get it done. LINDSAY WILLIAMS: What happens if this confidence is misplaced - a few slip through the net, and they don’t report in terms of IFRS? A slap on the wrist? Big fat fines? What happens? GARETH BLAYDON: Well, it is going to be interesting to see! As I said, these requirements are coming from the JSE - so it’s not legislated, at this stage. This, again, is in line with what is happening on stock exchanges in Australia and Europe. The US hasn’t embraced IFRS. Companies preparing non-compliant statements are going to be coming in for quite a lot of flak from their auditors - as we go into the future, in a more regulated environment, we are going to be facing the reality of more audits. LINDSAY WILLIAMS: What about small investors in the JSE - poor suckers like me - who like to look at what a company does, and what it produces? When it comes to accounting I’m not particularly interested, and not particularly fluent in these practices - is there any chance that you could see results of the 2004 financial year materially different in 2005 because of the adoption of these new standards? GARETH BLAYDON: That’s definitely a possibility, and I think the companies out there in the South African market place need to acknowledge that. Because of the way we’re producing these figures now - in many instances, it is often drastically different to what we’ve been doing under SA GAAP. Perhaps a lot of companies out there have got a little complacent - because South Africa has been a world leader in harmonising local statements with the international statements, as they are being developed. The latest changes - going into 2005 - we are looking at a number of significant alterations that are going to have an impact on the marketplace. Are your numbers going to change? Yes, they could change materially, in some respects. If they are a responsible company - preparing some kind of communication to all stakeholders and managers - this needn’t be a disaster. LINDSAY WILLIAMS: Ajen Sita, deputy managing partner of audit and assurance at Ernst & Young says: “With the vast number of changes and amendments to reporting standards that will result from IFRS 2005 one cannot help feeling that the possibility of users misinterpreting financial information - now presented in a different way - will be great.” Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :