Is Poland ready?
As implied from the other articles in this supplement, IFRS is complex and the implications of its application can be far-reaching. Aleksander Domaradzki, from PricewaterhouseCoopers, compares it to a Millennium Bug scenario.
"Remember how much noise there was about the Year 2000 issue? When the new millennium came, nothing really happened. Planes did not fall out of the sky, offices didn't suddenly shut down, and there was a lot of negative press for the advisory professions that this was an issue dreamt up by the profession to make money. That's not true. The reason why there wasn't an issue is because companies prepared for it," says Domaradzki. "They recognized that it was major, so they had projects to make sure nothing happened. For me, IFRS is exactly the same."
Perhaps the transition to IFRS will not have as potentially far-reaching implications as promised by the Millennium Bug. But is Poland ready for IFRS?
The simple answer is no. Not all executives at Polish companies understand the potential implications of IFRS on their business.
Well prepared?
"We would be unpleasantly surprised by how many people haven't started implementing IFRS properly," notes Domaradzki. "Some companies haven't realized how much they need to do. We won't know that until February, when company audits start.
"Companies don't realize at the outset that this isn't just about financial training of your accountants. It requires training people across the entire organization. It's not just technical matters. Because this is a business change, processes and procedures are going to have to change. So there is a whole aspect of having to train people in the new revised procedures."
Even those who understand the scale of the change may find the supply of advisers slim. Although all of the large international audit and accounting firms in Poland are obviously expending resources (and have been doing so for some time), and many of the larger multinationals have been preparing for some time, the demand for IFRS advisory services is outpacing supply in Poland.
London calling
It is not simply a question of professional accounting competence; quite the contrary. Those Poles who do master it, master it so well that they are shipped off to London to work at the 'answer desks' of the Big Four accounting firms, thus maintaining the gap in the Polish marketplace. Local auditors may simply not have a sufficient command of the English language, leading to another astonishing reality that encourages this knowledge gap. As of the time this insert was being researched, IFRS had not yet been translated into Polish.
"The biggest problem is that we still don't have the Polish translation of the IFRS provisions in Poland," says Mirosław Matusik from KPMG.
Daunting task
While those more cynical individuals may be quick to attribute this to yet another example of Polish bureaucracy in action, such a criticism would be premature. Moore Stephens' Joe Smoczyński emphasizes that IFRS is a complex document to interpret, difficult even for native speakers of English.
While the large international auditing firms have the resources to analyze and understand IFRS in English in every imaginable direction, and properly advise their stock exchange-listed client companies, not all listed companies use large international firms. Many of the listed companies use smaller domestic auditors, because up until now, that was all that was needed. But those smaller accounting firms are simply not ready, and may never be ready. "For small stock-exchange companies [that use smaller audit firms] it's a burden," says Smoczyński.
Home help
There are many more joint stock companies in Poland (spółka akcyjna, or SA) that are not listed, but by law must be audited. While not legally required to do so, some of them may wish to adopt IFRS for business reasons. As IFRS expands its reach in Poland, many may soon be obliged to report, but may find a lack of options on whom to turn to for help.
For these reasons, IFRS may mean not only a change in the way companies report, and how they conduct business. It will likely lead to a restructuring of the professional accounting services sector, as those firms which cannot cope with IFRS will either close down or be absorbed by larger accountancy firms.
By Robert Michaels
"Remember how much noise there was about the Year 2000 issue? When the new millennium came, nothing really happened. Planes did not fall out of the sky, offices didn't suddenly shut down, and there was a lot of negative press for the advisory professions that this was an issue dreamt up by the profession to make money. That's not true. The reason why there wasn't an issue is because companies prepared for it," says Domaradzki. "They recognized that it was major, so they had projects to make sure nothing happened. For me, IFRS is exactly the same."
Perhaps the transition to IFRS will not have as potentially far-reaching implications as promised by the Millennium Bug. But is Poland ready for IFRS?
The simple answer is no. Not all executives at Polish companies understand the potential implications of IFRS on their business.
Well prepared?
"We would be unpleasantly surprised by how many people haven't started implementing IFRS properly," notes Domaradzki. "Some companies haven't realized how much they need to do. We won't know that until February, when company audits start.
"Companies don't realize at the outset that this isn't just about financial training of your accountants. It requires training people across the entire organization. It's not just technical matters. Because this is a business change, processes and procedures are going to have to change. So there is a whole aspect of having to train people in the new revised procedures."
Even those who understand the scale of the change may find the supply of advisers slim. Although all of the large international audit and accounting firms in Poland are obviously expending resources (and have been doing so for some time), and many of the larger multinationals have been preparing for some time, the demand for IFRS advisory services is outpacing supply in Poland.
London calling
It is not simply a question of professional accounting competence; quite the contrary. Those Poles who do master it, master it so well that they are shipped off to London to work at the 'answer desks' of the Big Four accounting firms, thus maintaining the gap in the Polish marketplace. Local auditors may simply not have a sufficient command of the English language, leading to another astonishing reality that encourages this knowledge gap. As of the time this insert was being researched, IFRS had not yet been translated into Polish.
"The biggest problem is that we still don't have the Polish translation of the IFRS provisions in Poland," says Mirosław Matusik from KPMG.
Daunting task
While those more cynical individuals may be quick to attribute this to yet another example of Polish bureaucracy in action, such a criticism would be premature. Moore Stephens' Joe Smoczyński emphasizes that IFRS is a complex document to interpret, difficult even for native speakers of English.
While the large international auditing firms have the resources to analyze and understand IFRS in English in every imaginable direction, and properly advise their stock exchange-listed client companies, not all listed companies use large international firms. Many of the listed companies use smaller domestic auditors, because up until now, that was all that was needed. But those smaller accounting firms are simply not ready, and may never be ready. "For small stock-exchange companies [that use smaller audit firms] it's a burden," says Smoczyński.
Home help
There are many more joint stock companies in Poland (spółka akcyjna, or SA) that are not listed, but by law must be audited. While not legally required to do so, some of them may wish to adopt IFRS for business reasons. As IFRS expands its reach in Poland, many may soon be obliged to report, but may find a lack of options on whom to turn to for help.
For these reasons, IFRS may mean not only a change in the way companies report, and how they conduct business. It will likely lead to a restructuring of the professional accounting services sector, as those firms which cannot cope with IFRS will either close down or be absorbed by larger accountancy firms.
By Robert Michaels
