International standards make first impact

By Matthew Prichard

Friday 21st May 2004

The fast-approaching June financial year deadline for a large number of listed companies will provide the first major release of information about the impact of international financial reporting standards (NZIFRS) on New Zealand corporates.

Although listed entities are not forced to release NZIFRS results this June, many of them have been through the exercise of assessing the impact on their results and position and will be looking to meet investors' demand for this information.

Any releases of NZIFRS information this year are likely to fall into three categories:

Although they're not compelled to, best practice will be for a listed company to disclose hard financial information about the impact that NZIFRS rules would have had on the results they release. Many listed (and some unlisted) entities are going through this exercise now, and will have this information when it comes time to release their 2004 results under New Zealand standards. If they've got it, why not release it to the market?

Most listed entities will at least have been through a process of identifying the big-ticket items that affect their results under NZIFRS. Without putting hard numbers on them, a number are expected to include information about these issues and the direction of their impact on their 30 June 2004 results and position. Many are expected to take this option to avoid the risk of releasing hard numbers before they're further down the track with their internal project to ensure that they fully understand all of the potential impacts from adopting NZIFRS.

At the very least, investors might be concerned if a listed entity does not confirm they've started the process of identifying the impact of NZIFRS on their financial results, and tell investors when they plan to release their first NZIFRS financial information.

"While analysts' primary focus is on future earnings, the increased level of disclosure and the new information on fair values that is expected under NZIFRS will be eagerly received by the market" said Paul Hocking, CEO of Infinz, which represents New Zealand's investment analysts. "No surprises should be everyone's goal."

Companies or investors looking for examples of disclosure about the impact of moving to international standards could try the following:

KPMG's model annual report has a detailed example of this level of disclosure (www.kpmg.co.nz).

Watercare Services, a regular award winner for its annual report, has been providing a reconciliation of its results to international standards since its 2002 report;

Australia and New Zealand Banking Group's March 31, 2004, half-year report has detailed descriptions and directional but not quantified information; and

BHP Billiton's interim results released in February 2004 as an example of this level of "we're working on it" type disclosure.

Matthew Prichard is a partner in KPMG

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