ECONOMY

IAS amendment heads for Parliament

An amendment providing for the application of International Accounting Standards (IAS) by companies listed on the Athens Stock Exchange (ASE) is included in a draft bill to be tabled in Parliament shortly. The initiative is in response to the European Commission’s decision to adopt IAS throughout the European Union by 2005, at least for listed companies and consolidated financial statements. The Greek Economy and Finance Ministry has said that it aims to have IAS introduced in Greece as of January 1, 2003. The measure is seen as a structural change, which is expected to bring considerable benefits to companies, the ASE and the Greek economy as a whole. It is, nevertheless, a very difficult and complex process requiring considerable preparation. The Capital Market Commission (CMC) last year took an important step in this direction by introducing the (initially) optional submission of cash flow statements for listed companies. CMC Chairman Stavros Thomadakis, who has played a leading role in promoting the introduction of IAS in Greece, is optimistic. «The obligatory introduction is possible in principle. We can and must go ahead,» he tells Kathimerini. But it requires a very broad process of training for accountants, auditors and financial executives which must begin immediately, he adds. A recent survey of 167 companies, jointly conducted by ASE and auditing company SOL Ernst &Young, showed however that most firms remain totally unprepared for an immediate application of IAS. Only 20 percent consider themselves ready and the rest say they need between two and three years to prepare. Also, 60 percent take the view that they need ample time to institute the changeover, with the remainder believing a shorter time period is enough. IAS are projected to contribute significantly to transparency and opening of the ASE to international currents by making comparisons between Greek and foreign firms easier for investors. The majority of respondents, 107 of the 167, replied that they expect comparisons with European competitors to yield a positive results for their firms. IAS are also expected to make it easier to tell differences between listed companies by minimizing the possibilities for them to present false data and thus exaggerate the prospects for profit growth. Greece and most other EU members today apply national accounting standards which partly coincide with IAS. Cash flow statements, according to IAS, have been adopted to some extent but on the whole the «penetration» of IAS is minimal. The changeover will concern about 7,000 firms listed on bourses in EU countries. According to the commission, only 300 firms in the EU today partly apply IAS, 200 apply American Accounting Standards (AAS) and about 6,500 use various national standards. AAS will cease being an option for European firms as of 2007. IOSCO’s role The International Organization of Securities Commissions (IOSCO) has made what is undoubtedly the most important contribution to the promotion of IAS in Europe by adopting them in May 2000. This decision was widely regarded as pathbreaking, ending fears that the US might attempt a de facto imposition of AAS worldwide. About a year ago, the European Commission unveiled a draft directive for introducing into the EU by 2005 a common method of bookkeeping and drafting financial statements, based on the prototypes prepared by the International Accounting Standards Commission (IASC), founded by the International Accounting Association in London in 1973. To date, IASC has issued 41 IAS – of which 34 are in application – and 25 interpretation documents. The community directive will require listed companies to adopt prototypes after their compatibility with community legislation has been checked. The EU’s Supervisory Authorities Committee, which is composed of the heads of member state’s capital market authorities and includes Thomadakis, directs a number of sub-committees that have the broad task of preparing, introducing and, especially, monitoring the strict application of IAS after their introduction. IAS are a set of accounting principles founded on basic premises and intended to provide an objective approach to forming an overall picture of enterprises, as depicted in financial statements. The basic aim of IAS is to make financial information available for use in capital markets. The IAS model to be gradually introduced will be strictly based on the balance sheet, where assets and liabilities are analyzed and represent specific claims and commitments, while the profit and loss account will be based on purely financial data.