Net profits reduction is expected

The implications of the new accounting standards are expected to be most significant for the financial sector where reported earnings will be most affected. Irish Life & Permanent has already signalled that the accounting changes could reduce net profits, which totalled €262 million last year, by between 10 and 20 per cent next year.

Goodbody believes that Bank of Ireland is next in line in terms of impact with profits, which totalled €700 million at the pre-tax level last year, likely to be hit by around 10 per cent due to the accounting changes.

As with Irish Life & Permanent, this is largely due to the implications for its significant life assurance business.

Of the main banks, AIB is expected to see the least impact on profits - of the order of 3 to 4 per cent - particularly as it has been accounting for pensions under the new rules since 2001 while its life operations are small. Currency hedging is expected to be the big issue at Anglo Irish Bank, the broker believes.

AIB and Irish Life & Permanent will be the first two banks to report interim results under the new accounting rules for the period to the end of June. They will be followed by Bank of Ireland.