Iran's market regulator is implementing International Financial Reporting Standards in select Iranian companies as a first step to mandating their usage by Iranian businesses.
High quality, reliable financial information is the lifeblood of capital markets. The adoption of such standards will help attract foreign investors by improving international business ties, according to Hassan Amiri, the deputy head of Securities and Exchange Organization, SENA reported.
Accounting provides companies, investors, regulators and others with a standardized way of describing the financial performance of an entity. Companies listed on public stock exchanges are legally required to publish financial statements in accordance with the relevant accounting standards.
Laws and standards can change from country to country. IFRS are designed to mitigate these differences by forming a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
The Securities and Exchange Organization felt the need for adopting internationally acceptable standards.
"We have followed this course persistently," said Amiri.
After some correspondence with Economy Minister Ali Tayyebnia, a roadmap for implementing IFRS standards in Iran was drafted.
IFRS is a single set of accounting standards, developed and maintained by the International Accounting Standards Board with the intention of those standards being capable of being applied on a globally consistent basis—by developed, emerging and developing economies—thus providing investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers.
Adopting IFRS could lead to dual listings for Iranian companies in other exchanges and also for foreign companies on Iranian exchanges. Add to these increased foreign investment due to greater transparency and easier comparability, according to Amiri.
Companies that have high levels of international activities would benefit from a switch to IFRS due to the increased comparability of a set accounting standard.
Auditors Organization's approval came in 2011. Two years later, the SEO's board decided to move forward with the plan, which led to the formation of a committee under the SEO to pursue implementation in 2015. The committee is working with two ministries and eight state and private agencies and associations on IFRS. The Auditors Association is one of these and it is also working with IASB to issue IFRS standards to all its members.
The organization has prepared a list of companies, which will be mandated to adopt IFRS standards in their reporting for the current fiscal year (March 2016-17). Other companies can adopt the standards if they wish. The organization will add more major issuers to its list for 2017, gradually expanding IFRS' reach to all exchange-listed companies.
IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization quickly made the concept attractive around the world.
These days, IFRS are mandated for use by more than 100 countries, including the European Union and by more than two-thirds of the G20. The G20 and other international organizations have consistently supported the work of IASB and its mission of global accounting standards.
