The ICAEW says IFRS should be adopted without variation, and every company listed on regulated markets should have to use the standards without diluting them for local use and customs.

A decade since the controversial introduction of the accounting standards, ICAEW has launched a report Moving to IFRS Reporting: Seven Lessons Learned from the European Experience

The ICAEW endorsement of IFRS comes at a time  of hiatus for the standards as the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board are delaying plans to introduce the new proposed converged standard IFRS 15, Revenue from Contracts with Customers, and the European Commission’s own investigation into the effects of mandatory IFRS adoption.

The report is based on an EU-wide survey into the value of IFRS, where the majority of respondents said international standards have improved the quality and consistency of financial reporting.

ICAEW’s report supports this view, and makes important recommendations for countries that have recently adopted IFRS – or are considering it. These include a clear need for strong national enforcement regimes and enhancing the role of national standards-setters, as well as reducing local variations from the standards as issued by the IASB.

Dr Nigel Sleigh-Johnson, head of ICAEW’s Financial Reporting Faculty, said: ‘In spite of calls from some quarters for a return to the days when Europe had a patchwork of inconsistent national accounting standards, the evidence suggests that IFRS has been good for business and investors.

‘But this doesn’t mean we should stand still and consider it a job done. It has been a rocky ride and there is still much more that needs to be done by the IASB itself and by policy makers and other stakeholders around the world.’ 

‘For example, IFRS are developed primarily with companies that raise funds from the capital markets in mind. So the European Commission’s decision not to mandate IFRS reporting by private companies was wise.

‘But in hindsight, the decision not to extend IFRS to listed entities that are not groups and other public interest entities is more questionable.

‘There is also a need for balance when confronting the vexed issue of complexity. We live in a complex world and complex business transactions will often necessitate complex accounting solutions. Simplicity is not desirable if it means investors are less well informed.’

The 2005 decision by the EU to require listed companies to adopt IFRS in place of   domestic accounting standards accelerated the spread of IFRS adoption worldwide. To date well over 100 countries use IFRS or standards closely modelled on them.

The ICAEW also considers whether it makes sense to adapt the standards for local domestic use, but concludes that wholesale adoption is preferable. The report concludes that ‘experience suggests that the full benefits of IFRS adoption can only be reaped if the standards are adopted in full and not accompanied by local interpretations or quasi-interpretations, except where local legal or cultural differences make them absolutely necessary.

‘While it needs to be acknowledged that 100% uniformity may never be possible, as even a global language will encompass different dialects and accents, formal carve-outs should be kept to a minimum and wherever possible should have a limited life’.

Sleigh-Johnson stressed: ‘Progress towards the global use of a single, high-quality set of financial reporting standards should make doing business internationally and cross-border investment much easier, and should help bolster international business and investor confidence. Evidence suggests this is the case. However, the project can only continue to be a success if we learn the lessons of the past ten years.’

Moving to IFRS Reporting: Seven Lessons Learned from the European Experience is available here