At present, fewer than 10% of the corporates rated by Moody’s in Europe prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and the rating agency strongly supports efforts to achieve greater consistency in accounting practices. Where different accounting standards distort the comparability of financial information, significant additional effort is required on the part of users, and conclusions often have to be tempered.
Moody’s has developed adjustments that permit reasonable comparisons of key financial data produced under a number of different accounting conventions. However, the adoption of European Commission-endorsed IFRS from 2005 onwards by nearly all publicly traded companies incorporated in the European Union (EU) should improve the efficiency and transparency of Moody’s analytical processes.
In this report, Moody’s sets out the more significant changes that it anticipates will have to be made to financial statements from 2005 onwards. The expected impact on key credit metrics such as EBIT, interest expense, cash flow from operations (CFO) and debt is also examined.
