New York, December 12, 2012 -- Moody's does not expect the transition to international financial reporting standards (IFRS) in Argentina to have a broad impact on companies' credit ratings, though individual companies could be affected, the rating agency says in "IFRS Adoption in Argentina." The new report discusses the issues Moody's considers most important when analyzing the financial statements of non-financial corporations in Argentina during and after the 2012 transition.
"While transition to IFRS will lead to some changes in Argentine companies' reported credit metrics, a change in the language used to communicate them usually will not significantly affect a company's economic position," says Vice President and author of the report Kevyn Dillow. It is worth noting, she says, that the transition to IFRS in the European Union in 2005, and in Canada, Brazil and Chile in 2011, did not result in any direct rating changes.
But ratings of individual companies could be affected by the business impacts of conversion, related covenant compliance issues, or disclosure requirements that highlight previously unseen risks. "Rating changes could result from increased financial reporting risk if companies mismanage the conversion process, or fail to adapt their internal systems in a timely and orderly manner."
Upon transition to IFRS, credit analysis can be complicated by factors such as changes in reported credit metrics and inconsistencies in financial reporting and accounting policies among IFRS adopters. Among the issues covered in the report are how the new rules might affect dividends and taxes, as well as changes in reported revenues, increases in reported debt and decreasing assets and covenant breaches, the greater use of fair value and varying definitions of profitability.
"Generally speaking, we expect the quality of financial reporting in Argentina to improve under IFRS, since the outgoing regime was in many ways less demanding and IFRS tends to better portray underlying economic reality," Dillow says. "Furthermore, we expect that the resulting reduction in cross-border differences will improve analysts' and investors' ability to compare global peer groups."
Moody's research subscribers can access this report at http://www.moodys.com/research/IFRS-Adoption-in-Argentina--PBC_148095.
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Kevyn Dillow VP - Senior Accounting Analyst Credit Policy 250 Greenwich StreetNew York, NY 10007 U.S.A. Veronica Amendola Vice President - Senior Analyst Corporate Finance Group JOURNALISTS: (800) 666 -3506 SUBSCRIBERS: (5411) 5129 2600 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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