CFOs in Europe Favor International Accounting Standards

Journal of Accountancy, February 2001 | Go to article overview

CFOs in Europe Favor International Accounting Standards


Judging by a November survey of financial executives in Europe, there is considerable business community support for the European Commission's (EC) June 2000 proposal to implement the IASC's international accounting standards (IASs).

The EC's tentative plan to foster "comparable, transparent" reporting would, if approved by the European Union (EU), require publicly listed companies in member states to report their financial results according to the IASs by 2005.

The EC said it would continue developing its proposal, which would take effect after a transition period of no more than three years after it receives final approval from the Council of the European Union and the European Parliament.

Almost 80% of the CFOs who were polled during the survey backed the proposal, with more than two-thirds in favor of making the IASs the sole financial reporting standard or, at least, an alternative to each country's version of GAAP. Nineteen percent of the respondents worked for companies that already use the IASs, while 68% were from companies that reported according to national accounting standards only.

Of those that did not use the IASs, nearly 70% said they could implement them within the EC timeframe and 90% thought all EU member states could do so by 2010.

But when it came to assessing the readiness of corporate leaders to direct the transition to using the IASs, there were signs of trouble. CFOs reported that 43% of CEOs and 56% of board members did not know about the EC plan.

Despite the need for top management's involvement in the creation and fulfillment of an IAS implementation strategy, CFOs' uncertainty about the future of the EC proposal may have caused them to delay recommending a course of action to their superiors.

The extent of respondents' hesitation varied greatly. Nineteen percent said they would not set an implementation date before the EC made its plan final. But 64% of those already applying the IASs recommended that planning for their mandatory use begin by 2002. Advocates of early preparation stressed the importance of preparing analysts and shareholders for apparent changes in companies' financial performance under the new standards.

Half of all respondents (50%) identified strategic issues such as international marketability and mergers and acquisitions, rather than any technical accounting considerations, as their primary motive for converting to the IASs. …

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