‘Sri Lanka should be ready for comparative financial statements by 2011’:

Adopting IFRS in Asian countries vital

Charumini de Silva

As Sri Lanka is complying with International Financial Reporting Standards (IFRS) by 2011, it is important to create a better understanding of the challenges and solutions prepared in comparative financial statements by 2010.

From left: Partner KMPG, Reyaz Mihular, Get Through Guides (GTG) CEO, Vandana Saxena, John Keells Holdings PLC Group Finance Director, Ronnie Peiris, Partner PWC, Sujeewa Mudalige and Partner Ernst and Young, Asite Talwatte at the panel discussion. Picture by Sumanachandra Ariyawansa

Get Through Guides (GTG) CEO, Vandana Saxena said that there were numerous misunderstandings about different IFRS in local Generally Accepted Accounting Principles (GAAP) and many people believe that the conversion will only affect the finance function.

Asia was the first to recover from the global finance meltdown. Therefore, adopting the IFRS in Asian countries is vital, as it will have a conducive effect over the world’s economy in the near future, she said.

She was speaking at the Chief Financial Officers (CFOs) Breakfast Meeting organized by the Association of Chartered Certified Accountants (ACCA) Sri Lanka and the Institute of Chartered Accountants of Sri Lanka (ICASL) at the Cinnamon Grand yesterday. She said that as the forces of globalization prompt more countries to open their doors to foreign investments and expand business the public and private sectors have increasingly recognized the benefits of having a commonly understood financial reporting framework supported by strong globally accepted standards.

The IFRS adoption in Europe was fairly smooth and it helped the companies to enhance their management reporting in an effective manner.

There was a mixed picture in cost of equity capital in Europe. Countries such as the UK, Ireland, Norway Switzerland and Portugal recorded gains while Germany, Greece, Netherlands and Denmark had losses. Factors such as equity markets, transparency in markets and regulations gained strongly, she said.

The benefits viewed by Indian professionals noted that comparability and credibility was high with the enhanced conducive investment environment.

Enhanced business opportunities and easy access to finance are the other benefits in adopting the IFRS to the Indian financial statements, Saxena said.

Association of Chartered Certified Accountants (ACCA) Sri Lanka President, Nandika Buddhipala said that a common language in accounting to disseminate complex financial results of business entities has become essential, widely accepted and a long-felt need in a heavily interconnected world. However, the complexity of implementing the common language in accounting IFRS has always been a challenging task across various nations with their diverse cultural, political, management, legal, economic, tax, regulatory and IT differences.

This task has become more challenging with the global financial meltdown spread across the world due to close inter-connection of trading and economic activities of nations, he said. He said that as CFOs it is essential to educate their non-accounting colleagues about the complex subject matters of IFRS and to drive the organizations through the journey of implementing them successfully.