The mandatory adoption of International Financial Reporting Standards (IFRS) by listed firms this year is likely to overhaul the way financial statements are compiled and assessed. The core of the philosophy on which IFRS are based is that the statements reflect as accurately as possible a company’s financial situation at current values and prices. In other words, anyone reading the balance sheet – which now resembles a book – will have a true picture of a firm’s liabilities, assets and operations, which will now be fully illuminated. The Greek accounting standards employed to date left numerous dark corners, in the sense that many accounts were used in rather odd ways. For instance, they allowed favorable treatment of asset figures, holding valuations at artificially high prices, bad debts for which no provisions were made, extraordinary income from unlikely sources, fixed assets at inflated values, exceptionally long depreciation periods and expenses, and unduly high reserves. Such unsound practices simply aimed at dressing up results. Adding to the oddities was that chartered auditors could even sign balance sheets with which their reports did not agree! Particularly in recent years, when firms’ financial problems swelled, the picture of financial statements shows a peculiar dualism: The main, upper part of the balance sheet, which is dominated by figures, expresses the will and desires of managers, while the bottom part contains the auditors’ report. Quite often, the two parts bore no relation to each other, except insofar as they referred to the same company. This system evidently kept everyone happy, as firms had their financial statements dressed up as far as they could, while the auditors could rest assured that they did not digress from their professional ethics. Now, with the introduction of IFRS, this practice comes to an end and the auditors will not be able to sign balance sheets they do not agree with. The transition to IFRS is a particularly complex and difficult exercise. Beyond the technical problems involved, many listed firms are also finding it difficult to hire accountants acquainted with the new standards. Recognizing the difficulties, the Capital Market Commission this week extended the deadline for the announcement of first-quarter results according to IFRS by one month, to facilitate the transition. Although the large listed firms have systematically prepared for IFRS in recent years, it appears certain that a number of them will use the extended deadline. Nevertheless, EFG Eurobank-Ergasias last week announced its IFRS-revised results for 2004, which will provide the basis of comparison in 2005. The Bank of Cyprus has said it will announce its first-quarter results on May 12, Eurobank on May 19, Alpha Bank on May 25, and National and Piraeus on May 26. Emporiki has not yet set a date. Even though the banks have said that the adoption of IFRS will not significantly alter the picture of their results, analysts tend to think that divergences may grow from quarter to quarter.