Channel Islands faster than Europe

Mar 2010:
The Channel Islands swift adoption of International Financial Reporting Standards makes it better placed to meet the changing needs of the offshore investment fund industry, according to a new survey.

The report from Ernst and Young’s survey revealed an expectation that IFRS will soon become the European standard for investment funds. Senior Manager at Ernst and Young’s Asset Management Group, Richard Le Tissier, said there is currently little evidence that IFRS is being adopted by European nations, putting the Channel Islands in a good position to meet the future needs of the industry.

‘The Channel Islands were among the first jurisdictions to embrace the use of IFRS and therefore that puts fund managers and administrators in an excellent position. Many local companies have already adopted IFRS to some extent for investment fund reporting,’ he said.

However the report also points out that IFRS is still not being fully utilized by the fund industry in the islands and to a large extent many funds still apply other forms of reporting.

Guernsey and Jersey laws and regulations allow funds to prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP) and therefore many use alternative standards such as UK or US GAAP.

But in the medium term Ernst & Young believes it is looking increasingly likely that UK GAAP will no longer be acceptable for funds going forward. ‘Should the UK Accounting Standards Board proceed with its recent proposals current UK GAAP users will be required, in most situations, to adopt IFRS from January 1, 2012,’ explained Tissier.

‘While this may have a significant impact for financial statement preparers in the UK, the impact will probably be smaller in the Channel Islands,’ he added.

The number one concern of respondents to the survey on conversion to IFRS was the IFRS technical knowledge of their staff. Many local companies are already familiar with IFRS and for those that are not, they have immediate access to a community that is familiar with the requirements.

But the poll of leading fund managers, administrators and supervisors in 44 European countries found that just a fifth of fund managers and administrators who currently have the option to apply IFRS do so exclusively. Of those that have converted to IFRS, 48% reported that it had significantly improved the quality of their financial reporting.

The survey also revealed that 48% of managers and administrators believe that conversion had significantly improved the quality of financial reporting.