IFRSs are already influencing investment decisions in Europe
13 February 2006
Information provided in accordance with International Financial Reporting Standards (IFRSs) is already influencing the investment decisions of more than half of fund managers in Europe, according to a recent report. The PricewaterhouseCoopers/Ipsos MORI survey, IFRS – The European investors' view, reveals that conversion to the new standards is having a real impact on the way fund managers perceive companies and consequently the investment decisions they make.
The PricewaterhouseCoopers/Ipsos MORI survey of 187 fund managers in seven European countries shows that the overwhelming majority (79 per cent) regard the change to IFRS as significant.
Even before the year-end financial statements have been distributed, more than half (52 per cent) said the IFRS information reported in 2005 had directly influenced their investment decisions. 21 per cent said that when looking at potential investments, IFRS information had influenced decisions to buy, and another 17 per cent said that it was a factor in their decision to walk away from an investment. IFRS had a similar impact on decisions about existing investments – 22 per cent said it had influenced them to sell a company's shares, and for 11 per cent of fund managers it was a factor in holding onto shares.
Three-quarters believed that IFRS has been helpful in showing the financial risks that companies assume and 66 per cent believe that they provide a clear picture of companies' operational risks. This is one of the reasons, perhaps, that nearly three-quarters (73 per cent) of the fund managers reported that IFRS has had at least some impact on their perception of a company's value, with 27 per cent saying it has had "a great deal" or "a fair amount". This proportion is higher than might be expected, particularly at this stage, before the first year-end financial statements under IFRS have been reported.
According to the survey the majority of fund managers said they understood the implications of IFRS – 73 per cent said they know a great deal or a fair amount about the new standards and 76 per cent also felt very or fairly confident in their understanding of the impact of IFRS on the companies they invest in. However, only 12 per cent are 'very confident', so there is clearly still some way to go.
Whatever their levels of understanding, fund managers do appear to appreciate companies' efforts to present information under IFRS and are positive in their feedback. 81 per cent said management teams had coped effectively and 79 per cent found the information presented in financial statements prepared under IFRS useful.
This is an extract from a press release published on PriceWaterhouseCoopers' website. To download a copy of the report, go to http://www.pwc.com/ifrs