8. Accounting according to IFRS, dual-standard accounting

1. Principles

For companies listed on the stock exchange, commercial and stock market regulations in many cases serve as a basis for prescribing preparation of consolidated financial statements according to IFRS standards. This results in a dualism which obliges the enterprise to perform accounting in compliance with the code obligations as well as a system of rules. To avoid this double effort, the draft of the new accounting law in Article 962, Section 1 D-CO stipulated that an enterprise can waive preparation of an annual financial statement according to CO regulations if it prepares a financial statement in compliance with a recognized accounting standard. In the course of parliamentary debate, however, it turned out that consequences in terms of the reflexes occurring between accounting and other regulations have not been sufficiently appreciated, and this possibility was discarded at a meeting on 16th March, 2011 by the Council of States, following a proposal by its legal committee.

The failure of an opportunity to prepare financial statements according to a recognized standard raises the question of whether the planned reform’s objective can also be met differently, whether it is possible to draw up the balance sheet so that it complies with the code of obligations as well as the IFRS. If a concurrence of standards is prevented by mandatory requirements, there might still be a possibility of minimizing the effort of adjustment through a strong convergence of the two directives. This question is also relevant in view of the aspect that the IFRS may, at best, be invoked as a standard of internal financial management by the board of directors (cf. third subproject, item 2.3.4.). A use of IFRS would be favoured if it turned out that IFRS can be applied both as an external accounting norm as well as an internal standard of diligence for the board of directors.

Close inspection reveals that many supposed incompatibilities between CO and IFRS accounting can be overcome by exercising certain options existing in the two standards. For example, the principle of acquisition costs can also be selected for valuation according to IFRS regulations. For many categories of current and fixed assets, IFRS offers the possibility of choosing production or acquisition value instead of market value and amortizing it in the following years, just as in commercial law. Mandatory differences on the liabilities side can be found in the case of provisions. IFRS rules here are strict by allowing provisions only for future outflows of funds from past risks, but not for other risks lying in the future. In such cases, however, commercial regulations simply allow provisions instead of imposing them, so that an enterprise striving for a dual-standard financial can also relinquish the additional options for provisions found in commercial law.

Other differences exist with regard to grouping, apportionment and, in general, transparency which leads especially to further disclosure obligations in the annex and situation report. However, these additional requirements based on recognized standards do not contradict commercial law either. Its grouping rules and regulations concerning information provided in the annex are minimal instead of maximal, and accounting which goes further than what is required under the code of obligations is still correct under commercial law. This basic eligibility of a dual-standard financial statement can raise efficiency and save costs for enterprises which, necessarily or voluntarily (also) prepare balance sheets according to a recognized financial reporting standard.

2. Existent research

Investigations of dual-standard accounting have until now been focused on dual-standard reporting as per IFRS and US GAAP. This research field is new, because many countries still do not concur on how to adopt IFRS in national legislation. The question does not arise for countries which also permit IFRS financial statements for balance sheets in accordance with commercial law. In other countries where IFRS was used only indirectly as „inspiration“ for national legislature, the question certainly arises, and was also discussed in literature. No such studies exist as yet for Swiss law.

3. Method

The examination requires an analysis of the differences between IFRS and CO regulations to determine inevitable incompatibilities. To be noted in this process, however, is that only norms which may not be used in one of the two standards are inevitably incompatible. To be established therefore are the areas where the same results are obtained through a full utilization of all allowances and options in CO and IFRS. The investigation also seeks to demonstrate necessarily incompatible accounting regulations in whose case differences remain after a utilization of all options and structuring preferences, and demonstrate the differences with respect to the Swiss GAAP FER, that is, the question of whether dual-standard accounting would be easier if related to the Swiss GAAP FER. Research will not be restricted to depicting the similarities of CO and IFRS accounting. It is also planned to use the enterprise as a basis and show that relinquishment of certain transactions and complex assets (for example, in the area of financial products) can greatly simplify accounting. In most cases, such assets arise on the basis of conscious decisions, and by renouncing such instruments, the enterprise can therefore also control also the expenditure (and costs) of accounting. Especially small and medium-sized enterprises often have a balance sheet of a relatively simple structure, so that dual-standard accounting as per CO-IFRS or IFRS for SMEs does not necessarily lead to large, additional expenditures.

4. Dissertation: Accounting according to IFRS, dual-standard accounting

The results of this second sub-project are to be published in a dissertation on dual-standard accounting. The research project does not anticipate the method, though the work certainly also requires a synoptic representation of the differences between IFRS, Swiss GAAP FER and CO, and how these differences can be bridged through an exercise of options.