Move to IFRS standards may be challenging for Brunei Inc

ADOPTING the International Financial Reporting Standards (IFRS) may be challenging for Brunei because it would mean added costs to business owners not to mention the complex requirements entailed in following the accounting standards, industry players yesterday said.

"Introducing IFRS is no mean feat. Adopting IFRS would mean increasing comparability, relevance and reliability of financial information. Global businesses and international investors need to have accounting information that they can understand when making investment decisions," said Pg Izam Ryan PLKDR Pg Bahrin, a local chartered accountant, at the sidelines of the last day of the Asean Federation of Accountants (AFA) Conference.

"Yet some may say that this is at the cost of increased complexity in financial reporting. There is still an ongoing debate about the relative merits of 'fair value' (market-based) accounting that is promoted by IFRS," said Pg Izam Ryan, who is also the Head of Corporate Services at BAG Networks.

He said that one facet adding to the cost is developing the human resources. "Training is going to be a cost," he said, and more professionals would also require "training up" towards full proficiency in IFRS.

However, some of this is addressed by the continuing improvements in curricula taught in business courses and in professional qualifications.

Pg Izam Ryan didn't say just how much costlier it would be, but another industry source said that for the first year the cost of conversion towards IFRS would be fairly high.

"Depending on the size of the business in Brunei the mark up could be anything from 10 per cent to 15 per cent, possibly more," he said.

Another challenge facing Brunei is that its business sector is made up mostly of small and medium enterprises (SMEs).

This is why the AFA is moving to develop standards for SMEs because of findings that SMEs find the IFRS complicated despite the IFRS having specific accounting rules for SMEs.

Pg Hj Moksin Pg Hj Yusof, president of the Brunei Darussalam Institute of Certified Public Accountants (Bicpa), earlier said there was a need to work on a new accounting standard for SMEs in Southeast Asia.

He said one of AFA's primary members, the Federation of Accounting Professionals of Thailand, is already looking into the matter, with a view to coming up with a standard for SMEs. "This is likely to come out next year, and currently, because although the International Accounting Standards Board (standard setter) issued the IFRS for the SMEs, it is still complicated for some, or definitely for the Asean SMEs. So hopefully this new accounting standard will eventually be used by the SMEs of Asean," he said.

Pg Izam Ryan said, "Potentially, one compromise we can consider when balancing the needs of SMEs against our desire to improve financial reporting would be to adopt IFRS wholesale and carve out the complex requirements on fair value accounting."

He said that such a move would be similar to what had taken place in the EU, when in 2004 the European Commission adopted a "carve-out" version of the International Accounting Standard 39 or fair-value rule.

In Indonesia, regulators also decided to help out SMEs in moving toward IFRS by simplifying some of the rules, said Rosnita Uli Sinaga, chairperson of the Indonesian Financial Accounting Standards Board.



During her presentation in the session "Should companies be given a free hand to decide their own accounting standards?", she said Indonesia first determined what criteria are being used for companies that can and should use IFRS and what companies cannot.

She said that while extremely supportive of the "IFRS for SME", they found that only about 139 of the businesses were able to use it. This left out more than 50,000 businesses, she said.

To accommodate these businesses and "since IFRS for SME is too high and complex for them, we reduced the standard for them".

The Brunei Times