Why exchanges insist on IFRS
International investors compare companies across countries, and they can only do it if the numbers follow one framework. IFRS is accepted on almost every exchange covered in this encyclopedia. Some markets allow alternatives: AIX accepts other standards acceptable to the AFSA, HKEX accepts HKFRS and in some cases US GAAP, the Saudi Exchange applies IFRS as endorsed by SOCPA, and Euronext Growth allows local GAAP. In practice an issuer that targets a broad investor base reports under IFRS.
The financial information in a prospectus is not a formality. Underwriters build valuation models on it, lawyers write risk factors around it, and the auditor usually issues comfort letters on figures that appear in the offering document. Weak accounts weaken every other part of the transaction.
How many years of audited accounts exchanges require
The required period depends on the exchange and the segment. The table summarises the rules as recorded in our exchange database; the regulator may ask for more, and acquisitions during the period may require separate historical information on the acquired business.
| Exchange and segment | Audited years | Comment |
|---|---|---|
| DFM Main Market | 2 | 2 years of audited accounts for foreign and free zone companies under DFM rules |
| ADX Main Market | 2 | Plus profits in 2 of the last 3 years for the First Category |
| Nasdaq Dubai Main Market | 3 | Audited IFRS accounts or a shorter period acceptable to the DFSA |
| Nasdaq Dubai Growth Market | 1 | Up to 3 years if the company has operated longer |
| AIX Main Market | 3 | At least one year with net profit, waivable by AIX |
| AIX REMS | 1 | For issuers below USD 200 million market value |
| KASE Main Market | 3 | Audit by an auditor recognised by KASE |
| Saudi Exchange Main Market | 3 | SOCPA-endorsed standards, same main activity for 3 years |
| Nomu | 1 | Audited statements for the preceding financial year |
| HKEX Main Board | 3 | 3-year trading record with management continuity |
| LSE Main Market | 3 | Required by the prospectus regime, or a shorter period of operation |
| Euronext regulated market | 3 | Euronext Growth: 2 years, local GAAP allowed |
| AIM | No fixed rule | Historical information is set out in the admission document |
Moving from local accounting to IFRS
A first-time adoption of IFRS covers the opening balances and the comparative years as well as the latest year. If an exchange wants three audited years, the company usually needs an IFRS opening balance sheet at the start of the earliest year. The main steps are:
- Map local accounting policies to IFRS and list the differences by line item.
- Define the consolidation perimeter: which entities the group controls and from what date.
- Prepare the opening IFRS balance sheet and restate comparative periods.
- Build a consolidation model and a monthly close process that can be repeated.
- Agree accounting judgements with the auditor before the year-end audit, not after it.
Typical adjustments involve revenue recognition under IFRS 15, leases under IFRS 16, expected credit losses under IFRS 9, fair value of financial instruments, deferred tax and the treatment of intra-group balances. Each adjustment changes reported profit, and investors will ask why the IFRS numbers differ from the figures the company has published locally.
Choosing the auditor
Exchanges and underwriters expect an auditor that investors recognise. Some rules make this explicit: KASE requires an auditor from its recognised list, and a US listing on Nasdaq or NYSE requires an auditor registered with the PCAOB. Elsewhere the requirement is practical rather than written: banks prefer firms with experience of prospectus work and the ability to issue comfort letters to international standards.
Changing auditors close to the IPO raises questions, so the decision is usually made at the start of preparation. The auditor of the IPO accounts should be independent of the adviser that ran the readiness review and of any firm providing the accounting conversion.
Common problems
- Inventory or fixed asset counts were not observed by an auditor in earlier years, which limits the opinion on those periods.
- Group entities were acquired or created during the track record period without proper purchase accounting.
- Related party balances with shareholders are large and lack documentation.
- Subsidiaries close books on different dates or in different systems.
- Qualified or modified audit opinions in prior years, which several exchanges and underwriters treat as a red flag.
After listing, the obligation does not stop: listed companies publish interim and annual results on fixed deadlines. A finance team that can only produce IFRS accounts with heavy external help will struggle with that rhythm, so the conversion is also the moment to strengthen internal reporting.