The warnings are nothing new. But they are certainly getting louder and more earnest. Corporate education, information and communication on upcoming IFRS is urgently needed, according to a report released by KPMG.
The study says that companies must step up their efforts to assess and communicate the impact of International Financial Reporting Standards (IFRS) on their financial reports or risk an impact on share price.
In a survey of 100 buy- and sell-side investment analysts, 53% believed that the introduction of IFRS would have an impact on the valuations of company shares, but said that the markets had not yet factored these impacts into pricing. A further 5% were as yet unsure. Just over half said that there would be some market turmoil as a result of the change in reporting requirements, with 35% saying they would mark down the shares of a company that showed unexplained volatility in earnings.
IFRS will in many cases change the complexion of the financial information that analysts use to assess company performance. When asked whether they felt confident enough that they would be able to distinguish between changes that are the result of underlying business performance and those due to accounting changes, 46% expressed doubts.