IFRS to hit earnings of just four firms

Just four Irish listed companies will see their reported earnings decline by more than 5 per cent as a result of new International Financial Reporting Standards (IFRS), a new analysis from Davy has found.

After conducting an analysis across the market, the broker says Bank of Ireland, Irish Life & Permanent, Irish Continental Group and Trinity Biotech will be most affected.

Irish Life & Permanent will see between 8 and 22 per cent being shaved off reported earnings, according to Davy's analysis.

The main issue is expected to be the company's inability to embed investment products under the new standard.

Bank of Ireland will see its reported earnings fall by 7 per cent when it starts using IFRS, according to the analysis. The bulk of the impact will come from treatment of insurance contract and pensions, Davy says.

Irish Continental Group is forecast to suffer a 13 per cent decline in reported earnings under the new rules, with most of the fall due to the maturity and growth profile of the company and how this feeds into the treatment of pensions.

Reported earnings at Trinity Biotech are forecast by Davy to fall by 11 per cent, mostly due to changes to treatment of goodwill, share options and spending on research and development.

Davy points out that IFRS itself will not generally change the economic fundamentals or cashflows of a business. The broker notes, however, that where changes in the timing or recognition of income or expenses affects tax, the tax paid may change.

This theme has been taken up by the Association of Chartered Certified Accountants (ACCA), which warns that the new rules could lead to much higher tax bills for self-employed professionals.