RE: The issues and processes involved in listing of an organization in UK Stock ExchangeFollowing the need to expand Transform Group to a public owned company, it is essential to list the company in UK Stock exchange so as to further the expansion plans. Even though the group is currently ensuring that its strong financial statements are in line with UK Generally Accepted Accounting Principles (GAAP), there are a number of issues and processes that Transform Group needs to fulfill as part of the listing processes. The group, therefore, as part of the listing process should adopt International Finance Reporting Standards (IFRS) and comply with its requirements.
Adoption of IFRS has varying impacts on different organizations. Therefore, as part of the issues and processes involved in the listing process, it is essential for transform’s board to know the benefits of implementing IFRS as compared to GAAP application, the processes the organization will have to introduce in its accounting systems so as to allow the transition, the general principles of transition’s process to IFRS as required by IFRS 1, areas of accounting that the organization will realize significant difference between the required treatment under UK rules and those that will be needed after adopting IFRS rules.
The board is also expected to know the comparative impact that the adoption of IFRS will have on the company’s financial statements. The benefits of adopting IFRS as compared to the use of local GAAP The use of IFRS for reporting purposes as compared to the adaptation of local GAAP has several benefits to an organization. The adoption of IFRS does always provide an enterprise with a better access to global capital, funding and investment opportunities (KPMG, 2007).
As compared to organizations that follows local GAAP principles, many investors and financiers, both local and international, are always willing to invest in organizations that comply with IFRS. Roberts, Weetman and Gordon, (2008), highlights that, the acceptance of IFRS acts as a basis of harmonization financial statements. January 2005 created a significant stage in the initiative towards financial harmonization through the adoption of financial reporting standards (IFRS). In this particular year listed companies that are member states of the EU were obligated to apply IFRS in their financial statements, in place of the standards applied in their countries (Roberts, Weetman and Gordon, 2008). Therefore by adopting IFRS, Transform Group will be able to attract and access more capital, funds and investment opportunities around the world and also the EU.
The adoption of IFRS is also more cost effective for accounting profession since it does not require keeping of separate and isolated set of accounting standards, as it is the case when using UK GAAP. By adopting IFRS an organization can develop financial outcomes that are more clear and consistent, thus allowing the interested groups to use the outcomes internationally.
However, in the short run, the adoption normally implies the use of critical judgment and provision of many disclosures. The standards in IFRS are usually comprehensive and principles-based. These standards do always have little bright lines and their adoption needs greater utilization of professional judgment than UK GAAP. International Finance Reporting Standards (IFRS) have several accounting policy options than UK GAAP. Therefore, the adoption of IFRS by Transform Group will be of beneficial, since by concentrating on its various accounting policy options, the Group will be able to produce valuable results in the long run (KPMG 2007).