On February 11th, students from the INSEEC MBA Finance were given an insight into the workings of the International Accounting Standards Board.
Peter Walton, Chairman of the Financial Reporting Standards Committee of the European Accounting Association, Emeritus professor at ESSEC Business School, and regular observer at the IASB meetings, revealed the upcoming changes to the International Financial Reporting Standards.
« 2017 looks like being a year in which the face of many companies’ financial statements will change, said Peter Walton. Whilst the lifetime amount of revenue recognised by a company will not change, the amounts in each year’s income statement will change dramatically in the construction, telecommunications and information technology industries. Thus the ratios upon which equity analysts rely in their recommendations to investors will also change. Another big change is expected in many companies’ visible leverage, when all leases will finally appear on the face of the balance sheet. But we won’t know until after the event whether the analysts’ current rule-of-thumb calculations are accurate or wide of the mark.
Banks and insurance companies will also be significantly affected when the new standard on financial instruments finally allows them to present the more conservative and stable « bottom line » they have been asking for since the financial crisis. »