International Financial Reporting Standards
Federal Appraisal, LLC has appraisal experts to support your company’s transition and yearly International Financial Reporting Standards (“IFRS”) valuation requirements. FAC has long been a provider of appraisal services to the accounting industry, and to those in need of complex appraisal services.
The main benefit of IFRS is harmonization. Global businesses and international investors need to have accounting information that they can understand when running businesses and making investment decisions.
Convergence to IFRS however presents two major valuation reporting challenges:
1. Valuation variances from reporting period to period, which could increase the volatility of reported earnings from period to period.
2. Cost of appraisals and appraisal management.
Under IFRS (if elected), companies will need to revalue certain assets on a regular (yearly) basis. Therefore, market valuations will vary from period to period and sometimes substantially. This will result in an increase in volatility of the reported earnings, compared to some current reporting methods. While reporting the actual market value of the assets owned by a company is one of the main goals of IFRS, special efforts are needed to limit or eliminate earnings volatility that could result from unwise or unnecessary appraisal and appraisal management practices. FAC offers the appraisal and appraisal management best practices needed to control and minimize the possible volatility in reported values and earnings while keeping costs down.
Recommendations to IFRS Adapters and Managers
1. Plan a company-wide integration.
IFRS impacts more than just the central business financial reporting; it will impact departmental and subsidiary activities. Also it will impact more than just investor reporting; it will impact merger and acquisitions (M&A), tax reporting, treasury/borrowing functions, and legal and compliance due diligence.
2. Allocate proper resources.
Valuation and appraisal is a specialized professional service. Adequate IFRS appraisal expertise is often not available within a company.
3. Confirm independence as required in IFRS reporting.
Like the need for independent audit services, IFRS appraisal services must be independent and objective, and certified as such.
4. Establish best practices policies and procedures.
IFRS, as a principles-based system, allows for significant interpretation. Understanding the implications of various interpretations will require the services of professionals with advanced knowledge and experience. The advanced knowledge and experience should be utilized early in order to avoid later changes which will impact the volatility of reported earnings.