UPfront Standards adoption: Now or later?

It’s less than two years since NZ’s Accounting Standards Review Board announced this country would adopt International Reporting Standards (IFRS) – and while the deadline for that adoption is still more than two years away (2007), it could pay to move soon.
That’s according to Joanna Perry who heads IFRS services for KPMG in New Zealand and chairs the Financial Reporting Standards Board. She notes that local entities will be allowed to report their first full set of IFRS information for the financial year starting in 2005 – if they’re ready.
For most, it will mean preparing two years’ worth of income and cash-flow statements and three balance sheets – and 2005 adoption for March year-end means they’ll need an opening balance sheet as at 31 March 2004, income statements and cash-flow statements for the years ending 31 March 2005 and 2006 and balance sheets at the end of those two periods.
Many organisations faced with the tight timelines are considering later adoption on the basis that by then others will have been through the process and the latecomers can learn from their mistakes, says Perry. However, the desires of their board, investors, or bank may need to be factored in.
Companies with either parent or subsidiary companies in Australia or Europe may be forced into early adoption anyway to match requirements the offshore entities will face. There may also be pressure from markets for early adoption, says Perry.
“It’s important to carefully weigh up the pros and cons of adopting in 2005, 2006, or 2007. However the decision on when to first issue full financial report under IFRS should be separated from the question of when you need to do some hard work to understand the impact IFRS will have on your organisation.”
Both Perry and KPMG director Matthew Prichard advise starting the process now.