CURRENT international financial reporting standards (IFRS) must be made less complex if they were to be successfully implemented, according to Association of Chartered Certified Accountants (ACCA) chief executive Allen Blewitt.
From Jan 1, 2006, Malaysian companies must comply with five new and 17 revised accounting standards issued by the Malaysian Accounting Standards Board (MASB) to meet the IFRS.
Blewitt said the notion of an IFRS applied across the board to all companies irrespective of their size (in terms of market capitalisation and turnover) might appear to be the right solution.
It may help standardise accounting reports, improve transparency and reduce work duplication, but it could also be difficult to implement and enforce, he said.
The International Accounting Standards Board (IASB), he said, needed to shift its emphasis towards the concerns of countries trying to adopt IFRS based on individual needs, especially in the case of smaller non-listed companies.
Some companies, especially smaller ones, may find it too cumbersome and impractical to comply with the IFRS, and the effort may be counter-productive since their turnover may be too small to warrant such stringent compliance, noted Blewitt.
He said total IFRS compliance was likely to put a strain on the growth of smaller companies as a lot of their time and energy would have be spent on compliance rather than on growing their business.
From my interactions with the business community around the world, it is clear to me that the host of the standards and complexity of the concepts represent a very real problem for companies in many countries, Blewitt said.
According to him, the standards have been described as a major turn-off and a disincentive for accountants and those who run companies.
People who qualified as accountants, and who are now principals and managing directors of companies resent the fact that they can no longer understand the accounts of the business that they once helped build, he said.
What I believe the IASB most urgently needs to address are the barriers to implementation.
He said an IASB dedicated for small and medium-sized enterprises (SMEs) was urgently needed, especially since there were concerns among the smaller businesses that the current focus of IASBs considerations was the large listed entities.
Moreover, he said, there should be some degree of flexibility in IFRS to accommodate SMEs' business structure.
Blewitt also raised the problem of translation of the standards in many countries where English is not the dominant language.
What may be needed are highly sophisticated translators with good knowledge of the English language as well as technical accounting concepts. Such people are rare, he said.
Blewitt said the problem was compounded in the standard-setting process when there was inadequate time between exposure draft and finalisation to allow countries to translate, disseminate the exposure drafts and finally get a response.
These issues will have to be resolved if global standard setting is to be credible beyond the largest entities, he said.
Countries that have implemented IFRS include Britain, Australia and Singapore.
These countries also encountered problems, particularly at the early stages of the IFRS implementation, he said, adding that Malaysias late compliance to IFRS could benefit the country in terms of learning from other countries' experiences.
Asked if chief executive officers, captains of industries and those in the accounting profession in Malaysia were prepared for IFRS implementation and enforcement, he said: I would like to think so, but Im not sure.
ACCA is the largest and fastest-growing professional international accountancy body with over 105,000 members and 240,000 students in over 170 countries.
It is the first accountancy body to offer students the option of following a professional syllabus based on international accounting standards and now offers IFRS diploma courses.
Did you find this article insightful?