More realistic reporting to bring changes in behavior of investors
The market is preparing to receive an important and needed change, but may not be psychologically ready for it. The application of the International Financial Reporting Standards (IFRS) on balance sheets and accounting reports of stock market-listed companies will considerably change their picture. The basic difference in the principles to be applied by companies compared to what had been the case until now is that capital, obligations and requirements of companies will be recorded at a value near the current market one. The estimate of the real price refers to the value of the shares or subsidiaries of companies, the value of real estate, and their actual obligations. Certainly, the five or six big companies listed in stock markets abroad issued their results based on the IFRS because they were obliged to do so and those results only had a value in the international market. As the only results to be available, the new figures are expected to create a shock, revealing a picture which, for smaller companies, could be very different from the «old» results. The confusion will actually be greater as there are no results and data using those standards from previous years, making comparisons impossible. Investors will not be able to evaluate increases in profits but will see clearly the cash flow of companies. This may also change the way they regard prospects. They will appreciate more the money companies actually possess, rather than the capital gains they promise. They will have a more realistic picture about the net worth of enterprises and will be able to place their bets with greater certainty. The new era promises more realism…
