UPFRONT It’s IFRS – shout about it!

It seems companies face real risk that their financial performance as reported under new International Financial Reporting Standards (IFRS) may be misunderstood or misinterpreted by the markets.
That’s if local reaction reflects the results of survey of financial analysts in Melbourne and Sydney carried out by KPMG to test the readiness of capital markets for the new-look reporting. This found quite few misgivings and confusions about the impact of the new standards.
Nearly half the surveyed analysts expect the Australian equivalents of the international accounting standards (AIFRS) to cause at least some market dislocation. majority – 62 percent – say they’re likely to mark down company’s shares if they don’t understand why its results look different under AIFRS – and there is confusion as to whether the move to AIFRS will yield more or less insight into company performance.
Overall, analysts were sceptical about the benefits of AIFRS with more than half citing the potential for misinterpretation, confusion and market volatility as the most significant disadvantages of moving to AIFRS. Less than third believe its adoption will lead to better investment decision-making.
The survey should sound few warning calls to local companies, according to KPMG’s national IFRS leader in New Zealand Joanna Perry.
“To help analysts and the market better understand and appreciate the move to IFRS, companies really need to put high priority on market communications. This requires formal communications plan that addresses what the markets need to know about IFRS.”