Upfront: Europe Closes the GAAPs

Last year some 8,000 listed companies in the European Union were required, for the first time, to file their statutory financial statements using International Financial Reporting Standards (IFRS) instead of their national GAAPs. The FASB is working toward convergence with IFRS, so the Big 4 accounting firms have been studying the results of the changeover carefully.

How successful do they rate the transition? A study released in September by Ernst & Young declares it a "resounding success" but adds a caveat that there's a long way to go to achieve consistency and comparability in all aspects of financial reporting under the international standards. The research examined the financial statements of 65 of the largest organizations that filed under IFRS in 2005.

"At one level, the fact that everyone has implemented IFRS in a timely manner can be considered a major success, particularly as, for everyone, the transition to IFRS involved significant changes from previous reporting requirements," says David Lindsell, head of Ernst & Young's global IFRS practice in London. The 52 companies in the sample that were first-time filers under IFRS addressed that challenge and were able to issue preliminary results announcements and financial statements in much the same time frame as the previous year.