IFRS transition: Crunch time for the retail and consumer sector

Most companies in the retail and consumer sector are preparing for the major changes that will come about with the introduction of the new International Financial Reporting Standards (IFRS), which will become mandatory for all listed European companies from the January 1, 2005.

These new standards, which represent much more than a change in accounting principles, will affect the way companies operate and are perceived by the market. For example, the retail and consumer sector can expect profound changes in the way it deals with such items as revenue recognition, vendor allowances or fixed assets. An understanding of these changes and their implications should now be considered a priority in order to make the transition as seamless as possible. Some of the more specific issues are presented below.

Industry-specific guidance is needed in the Retail and Consumer Sector

To help retail and consumer companies do this, experts at PricewaterhouseCoopers have identified ten key industry-specific areas, which, with their sub-issues, require particular attention in terms of interpretation.

Revenue recognition	Capitalised costs and deferred costs
Vendor rebates and allowances	Brands and intangible assets
Customer incentives	Inventories
Reporting policies	Loss-making stores and closures
Property and leases	Financial instruments and embedded derivatives

Conclusion

		Applying IFRS – finding the right solution For each of these issues, practical recommendations have been developed or are under development. PricewaterhouseCoopers experts will keep monitoring these issues and communicate with you on these new challenges facing retail and consumer companies during the IFRS transition process. You can also find PwC solutions to many specific IFRS issues in the firm’s authorative guidance on the application of International Financial Reporting Standards, “Applying IFRS”. Find out more by visiting www.pwc.com/ifrs