Accountants Fees

An accountant goes into a pet shop to buy a parrot. The shop owner shows him three identical parrots on a perch and says, "The parrot on the left costs $500."

"Why does that parrot cost so much?" asks the accountant.
"Well," replies the owner, "it knows how to do complex audits."

"How much does the middle parrot cost?" asks the accountant.
"That one costs $1,000 because it can do everything the first one can do plus it knows how to prepare financial forecasts".

The startled accountant asks about the third parrot, to be told it costs $4,000. Needless to say, this begs the question, "What can it do?"
To which the owner replies "To be honest, I've never seen him do a darn thing, but the other two call him Senior Partner."

10 major consequences of IFRS

Its official debut comes in accounts with a 2006 closing date. However IFRS, the new international accounting rules, are actually already here, because accounts for the current year are going to have to be expressed under IFRS rules for comparison with the 2005-06 numbers when they are posted.
Here's an overview of 10 major changes due to IFRS that are coming up:

1. Accountants: are having a boom year. Remarkable if you remember the crisis that led to these changes was caused by accountants to an extent.
2. Balance sheets: will be smaller and more highly geared. So that should clean up things over there a little bit.
3. Profit statements: will be more susceptible to unexpected change. Probably leading to increased volatility of stocks. Stock trading may increase as a result.
4. Intangibles: If they are internally generated, they have to be written off, usually against retained earnings. The change will shrink balance sheets and boost gearing, and may force the renegotiation of debt covenants. Companies with strong brand portfolios in the food, drink and media industries are likely to be affected, as well as companies that place values on items such as research and development, trademarks, copyrights and other intellectual property.
5. Property: Under IFRS, changes in individual property values must be calculated, and they will all go through the profit and loss statement. As part of this change, existing property revaluation reserves are to be transferred to retained earnings, providing a buffer for some companies against write-downs on intangible assets.
6. Defined benefit superannuation plans: Most companies have closed their defined benefit plans off, in favour of defined contributions plans. But the defined plans are still slowly running down, and under the new accounting rules, positive and negative changes in their value - when the market soars or slumps for example - will go to the profit and loss statement.
7. Asset impairment: Companies already justify the carrying values of their assets, and write them down if they cannot. Under IFRS, however, they will have to run much tougher tests, and examine smaller business units - in retailing, individual stores, not just a chain, for example.
8. Employee stock options: One of the lessons of the '90s boom and the bust that followed was that employee options have a cost that should be accounted for. The new system does this, but in a way that creates distortions. Share options are valued at their creation as if they will be exercised, and then written off against earnings over their life. But even if they are not exercised - because the company's stock price is too low, for example - the written-off amount cannot be written back.
9. Financial hedging: Under the new rules, general hedges are out. Hedges must be tied to specific deals, and priced realistically. Groups that run big, unallocated hedge books, notably banks, are going to have to book changes in their value through profit and loss statements. Banks in Europe have fought against this provision.
10. Goodwill: Companies that pay more than net tangible asset value in takeovers at present have to write the goodwill - the excess over net assets - off against earnings, over a maximum of 20 years. Under the new system, they do not have to write that goodwill off at all. Logical, but philosophically opposed to rules on intangibles.