Major supermarket chains are adopting the complex IFRS16 — and life just got harder for those reading the reports
Last week, just days after Tongaat Hulett released a summary of the results of PWC’s investigation into allegations of malpractice, Woolworths held a teleconference to explain to the media and analysts the dramatic and unwieldy implications of the latest change in the International Financial Reporting Standards. The two events are tangentially related.
Days later during a teleconference, the Woolworths group’s CFO Reeza Isaacs described the heart-stoppingly complex changes required by the implementation of IFRS16, which aims to bring leased assets onto the balance sheet. The figures for Woolies are as hefty as they were for Pick n Pay and Shoprite, who’ve already gone through the process. The size of its balance sheet increases by a huge 58% while headline earnings per share shrink by 9.3%.
But the additional complexity created by every new rule has prompted users and leading academics to question whether IFRS may now be playing a contributory role in the “malpractices” and “irregularities” hitting the headlines. It might produce the perfect set of accounts for someone who is honest but, as one accountant said, it opens up all sorts of opportunities for the not-so-honest.
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