Many Bermuda companies are facing the prospect of changing the way they report their financial results, as regulators seek to move towards a global accounting standard.

The Island's publicly listed companies will have to adopt International Financial Reporting Standards (IFRS) for the fiscal year beginning in 2011, instead of the currently used Canadian Generally Accepted Accounting Principles (GAAP).

According to John Wight, chairman of the Institute of Chartered Accountants of Bermuda (ICAB), the change will introduce more transparency and will enable investors to better understand corporate financial statements. And as the use of IFRS spreads across the globe, standardising financial reporting, it will enable comparisons of more companies across borders.

Some enterprises have concerns about extra costs incurred in the transition to IFRS. Last Thursday, shareholders of Bermuda Container Line Ltd. voted for the company to delist from the Bermuda Stock Exchange (BSX). The move had been recommended by the BCL board primarily because of the expected costs of moving over to IFRS in 2011, BCL president Geoffrey Frith told this newspaper.

But Mr. Wight, the chief executive officer of insurer BF&M Ltd., said the change was all part of moves towards better transparency and corporate governance that have been progressing throughout the decade.

"IFRS is a standard that the whole world is moving towards, because it will improve the transparency of financial reporting," Mr. Wight said.

"Over time, the entire world will be using the same sort of accounting standard. Now each country has its own GAAP and each may be different from others. IFRS will make financial reporting more comparable."

IFRS would bring greater disclosure requirements for users and more information for investors.

"In some cases there will be additional costs that come with IFRS — mostly transitional costs — but even with Canadian GAAP, there have been new standards added over the years," Mr. Wight added.

"On balance, I think IFRS will be a good thing, because it will help investors to better understand the companies they are investing in."

Canada and Bermuda are two of many jurisdictions that have committed to moving to IFRS. The accounting body behind IFRS is the International Accounting Standards Board (IASB), which has worked closely with its US counterpart, the Financial Accounting Standards Board (FASB) towards a convergence of US GAAP and IFRS.

US financial regulator the Securities and Exchange Commission, in August 2008, announced a timetable that would allow some US companies to report in IFRS by as soon as next year and to require it of all companies by 2014, although no date has yet been fully committed to.

Mr. Wight said BSX-listed BF&M is working towards IFRS reporting for 2011 and he described the imminent change as "not that onerous". He added: "It's a process we are willing to go through because it makes sense."

Most private companies will not be obliged to convert to IFRS in 2011 and will be able to utilise a GAAP standard that will require a little less disclosure, Mr. Wight said.

"Each company will have to discuss the merits of the additional closure and also the larger issue of the benefits of a listing on the BSX," Mr. Wight said.

Since the series of accounting scandals at companies like Enron and WorldCom at the start of the decade, governments and regulators across the world have moved towards more disclosure and higher standards of corporate governance. Another wave of large-scale frauds that came to light as the financial markets crashed last year, exemplified by the Bernard Madoff Ponzi scheme, has added impetus to moves to protect investors.

BSX CEO Greg Wojciechowski said the move to IFRS would help ensure that Bermuda kept in step with the rest of the world.

"Transparency is important, disclosure is important, this is the international standard and Bermuda and shareholders of companies operating here deserve no less," Mr. Wojciechowski said.

He believes that companies — and their shareholders — who opt to lose their public company status lose a lot with it.

BSX listing offers companies alternative access to capital and enhanced corporate reputation, while shareholders get protections and the ability to sell their shares when they want to through a regulated and transparent market.

Mr. Wojciechowski said the BSX website has recently increased the easy availability of issuers' corporate information via its website.

Each listed issuer entry now comes with its corporate profile, share price history and a record of dividends paid out, as well as annual financial statements attached.

The transparency of listed companies can give institutions from lenders to government agencies added comfort when dealing with BSX-listed companies, Mr. Wojciechowski added.