With many companies at the end of their first full IFRS reporting period, we publish Real Time, which examines the reality of reporting under the new standards for companies in the oil & gas and utilities sectors.
Both industries are characterised by the need for big upfront investment, often with great uncertainty about outcomes over a long-term time horizon. Their geopolitical, environmental, energy and natural resource supply and trading challenges, combined with often complex stakeholder and business relationships, has meant that the transition to IFRS has required some complex judgements about how to implement the new standards.
Real Time looks across the value chain of each industry and discusses in detail how the new standards are being put into practice. We identify areas where companies have to exercise considerable judgement in applying the standards, in particular in respect of derivatives and financial instruments, impairments and the recoverability of costs. Alongside these, we see how developments in the wider environment, such as emissions trading and energy price volatility, are accentuating the reporting challenge faced by companies.
One of the challenges of working with ‘principles based’ standards is that without a ‘rulebook’, management needs to spend more time explaining the judgements they have made to apply the principles. We see companies grappling with issues that appeared at year end – how to present and describe the volatility arising from IAS 39, the difficulty of calculating deferred tax, collecting information for disclosure requirements and still producing financial statements in fewer than 100 pages!
Real Time provides insights into how companies are responding to these challenges and includes examples of accounting policies and other disclosures from published financial statements. As companies move forward, the challenge will be to embed IFRS into the ‘real time’ day-to-day practice of the company. Many companies remain in ‘special project mode’ and are yet to make the successful transition of making the standards integral to ‘business as usual’ activities. In contrast, others have not only achieved this for their external financial reporting but have also successfully aligned their internal management and performance reporting with IFRS.
More information
Contact Name
David Thomas, Technical Project Manager
Contact Phone
+49 89 5790 5318
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