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Conversion Timetables

Conversion Timetables

The new International Accounting Standards are coming. Are you ready?

Y2K, GST, conversion to euro, B2B . . . It seems CIOs are doomed to expend huge amounts of energy racing to complete work imposed on them by others with unrealistic ideas about deadlines and zero comprehension of the complexities of IT. But at least in the past they have been pretty much aware of the extent of the change under way. Most CIOs have become used to working to tight, outwardly-imposed timetables, but when it comes to complying with the new International Accounting Standards (now referred to as the International Financial Reporting Standards), experts warn there are significant compliance issues on the way about which some CIOs may not yet be fully aware.

By now most Australian CIOs know they face a drop-dead date of January 2005 for implementation of the International Accounting Standards (IAS). What seemingly has not dawned on some is that the precise detail of some of the changes will not be available until 2004, which is also exactly when some of the bigger companies' financial statements will have to have been recast in the light of those new standards. That is a very big ask.

"It will be an absolutely major headache," says Stef Mason, a tax partner with Ernst & Young's business tax management solutions group. "The International Accounting Standards will apply from January 1, 2005. The extent to which more detailed AASB [Australian Accounting Standards Board] requirements continue to apply is unknown, so that there's a bit of uncertainty around some of them in terms of what actually will be implemented. [That uncertainty] is probably the most difficult thing to deal with in most environments, because if you've got requirements that are fairly specific you can plan for them; but if the requirements are not necessarily laid down in concrete then you have got to plan for the fact that they might change. It can be very difficult, particularly where it has cascading impacts on some of your lower level systems."

Mason says some changes will come into play earlier than January 1, 2005, with the need for comparatives and accounting pronouncements from the interpretation body, the Urgent Issues Group, in respect of the changes. Other analysts are also warning of major risks to Australian companies. Disagreement remains, however. AASB project manager Ellen Stoddart is uncertain whether the impact will be too damaging.

Stoddart points out that those Australian companies which are facing the most pressing deadlines - the ones which report to America and have a June end of financial year - are likely already to be complying with New York Stock Exchange and US Securities and Exchange Commission requirements.

"You would already be doing reconciliation and disclosure, at least to account for such equity compensation in accordance with the American standard SFAS123, so I assume those companies already have a structure there," she says. "Those that are not reporting through onto an American exchange because they haven't got listing on an American exchange, as far as I know only have to do one year of comparatives. We are trying to get them to be interested in and comment on the proposals, and feed back to us what they think of the proposals and how they think they could be done better or whatever."

But with such widely divergent opinion about, accounting experts have good reason to warn that when it comes to efforts to ensure compliance with the new International Accounting Standards by 2005, time is quickly running out.

Sarah Bernhardt, a partner with law firm Allens Arthur Robinson, fears the signs all point to a huge shadow hanging over the ability of organisations to complete necessary work on time. From her tax and corporate law perspective, Bernhardt believes the lack of evidence that organisations are getting on top of the changes points to serious problems with the proposed timeline for adoption. "The timetable was ridiculously tight to start with from the announcement date, and the fact that people really haven't got on top of it quickly is an indication . . . I personally have serious doubts about whether we can be ready for that start date. I seriously doubt whether it can be done," she says.

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More about Allens Arthur RobinsonCommonwealth Bank of AustraliaCommonwealth Bank of AustraliaCommonwealth Bank of AustraliaCommonwealth Bank of AustraliaErnst & YoungErnst & YoungExposureSECSecurities and Exchange CommissionTelstra CorporationVerbatim

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