Fitch Ratings: IFRS and International Accounting Convergence; Revolution or Evolution?

The European Union (EU) will adopt International Financial Reporting Standards (IFRS) for consolidated statements of all companies with quoted equity for financial years beginning after Dec. 31, 2004 and for those with quoted debt two years later.

IFRS is a comprehensive system of accounting standards and interpretations intended to provide global accounting consistency and comparability. Most countries outside the EU, including the U.S., Australia, and China, have made clear their intentions to converge their unique accounting systems with IFRS.

Many companies already have converted to IFRS, mostly for market-based reasons. For example, some of these companies are headquartered in countries whose accounting standards lack global acceptance, but they desire access to the international capital markets. These multinationals include financial institutions such as UBS and corporates such as Nokia.