Waiting game or ahead of the game?

In PwC’s 2007 survey ‘Has the dust settled yet?’, it was estimated that less than 20% of UK companies have adopted IFRS in their UK subsidiary accounts. UK GAAP is expected to be withdrawn by 2011 – making conversion to IFRS for most UK subsidiaries inevitable.

So, why have so few done so? Our research shows that the primary reasons for not converting to IFRS at the subsidiary level are uncertainty around the potential tax implications and the potential to create dividend traps (or undistributable reserves). 

The good news is that the IASB has alleviated some of the distributable reserve concerns with the amendments to IAS 27 and IFRS 1. Although understanding the tax implications remains complex, if companies assess early, it will allow more time to develop tax strategies to minimize any adverse impacts or to realise tax benefits sooner. 

To assist with decision-making, we have produced a new report on adopting IFRS in UK subsidiaries. The objective is to help companies begin to think about the costs and benefits of adopting IFRS now vs. when it is mandated.