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When the clock chimed midnight on December 31 2004, it heralded more than a new year. It also ushered in the biggest ever reform of European accounting.

Listed or public companies in Europe are no longer to be held against national accounting rules. Instead they will have to prepare accounts under the new International Financial Reporting Standards (IFRS).

The IFRS is an attempt to harmonise financial reporting internationally. UK companies will feel the impact less than their European counterparts. The best example is that of attitudes to shareholders. Reports in the UK have traditionally been orientated towards shareholders. In Europe they are for bankers.

The level of impact is a moot point. The 'Big 4' accountancy firms would have us believe that huge amounts of consultancy are required. The Financial Services Agency (FSA) have queried the readiness of companies, particularly small ones.

The new rules have not been drawn up without political interference. A fierce debate raged over one particular standard IAS 39, which deals with Hedge accounting.

One effect of the new standards is predicted to be more volatile earnings.

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