The new standards
The crisis of confidence that has shaken the globalized economy will be costly to big companies, their shareholders and the top managers: The latter, to a great extent, are personally responsible. Greek businesses are also at risk of a crisis they did not anticipate. Investment firms, already suspicious of Greek firms for not adapting to the stricter International Accounting Standards (IAS), will now have an additional reason to limit any investments on the Athens Stock Exchange. Economy and Finance Minister Nikos Christodoulakis is perfectly aware of this danger, which is why he has tried to cajole Greek enterprises into adopting IAS at a faster pace than the law dictates. According to professor Costas Varvakis, one of the people who had codified the Greek accounting standards, the transition must be fast. «No reform will actually be implemented if we do not decide to finish the task at hand as soon as possible,» he says, further remarking that adapting to the IAS will not be easy. The new method’s «secret» does not lie in its different accounting practices and techniques. It lies in its requirement of providing shareholders, tax and other authorities with a «true and rational picture» of the events and developments within an enterprise, says Pola Hadzisotiriou, financial director of EFG Eurobank Ergasias, one of the few Greek businesses to have adopted IAS. The real difficulty in adapting to IAS is that «they demand hard thinking and clear judgment,» she says, not that they are more difficult technically. Varvakis agrees with that and defends the existing law on enterprises (Law 2190) as adequate in forcing enterprise management and accountants to depict their firms’ true financial position. He adds, however, that additional measures will be needed to assist accountants in developing common practices. One cannot expect a jump in accounting practices in the few months remaining until IAS become obligatory, on January 1, 2003. That is why the following year will be a transition period, when firms will have to use IAS in the most financial parameters, while also keeping to the old standards. «The burden is really heavier on listed companies,» says Yiannis Sidiropoulos, director general of the Economy Ministry. «They must ensure comparability with European and other international firms, otherwise many obstacles to getting foreign capital infusions will remain.» As will become apparent soon, with the publication of a paper by the commission of civil servants that monitors the transition into IAS, this transition will not initially change the way Greek enterprises are taxed. For taxation purposes, the authorities will still estimate the size of the enterprise, its turnover and profits, on the basis of the old standards. The adaptation of taxation legislation will take some time. A fact which may be reassuring to enterprises but which will prolong the confusion about the real size of the Greek economy. The other problem has to do with chartered auditors. The body of Greek chartered accountants needs to grow away from its formalistic approach to issuing certificates testifying to the veracity of a firm’s accounts and become more critical. I had remarked in a previous column that the way Greek enterprises handle their accounts is problematic. Adopting the new standards will help them present a truthful picture of their finances, free of tricks. They will be forced to do so, anyway, by the increased vigilance of prospective investors and banks, the very people who provide needed capital.
