Most financial institutions have not prepared for the impact new accounting standards will have on their business, according to accountancy firm PricewaterhouseCoopers.

Businesses are still not sure how the new international financial reporting standards (IFRS) will affect investor relations, volatility of earnings, finance-raising capability and corporate development, a survey of senior executives reveals.

The survey of 85 senior executives from financial institutions worldwide, conducted by the Economist Intelligence Unit on behalf of PricewaterhouseCoopers, shows that just 38 per cent of financial institutions rate their organisation's understanding of the business impact of the new regulations as "good" or higher.

The new standards, which will make accounting practices consistent throughout Europe, are due to be implemented in financial statements by January 2005.

Mr John McDonnell, IFRS partner, has warned that if financial institutions continue to treat the introduction of the regulations as a technical accounting issue rather than an issue that affects business as a whole, they will face a "serious uphill struggle" as the deadline approaches.

"The clock is ticking," Mr McDonnell said. "It's fair to say a number of financial institutions have underestimated the amount of work that needs to be done."

Financial institutions need to determine how the new standards regime will affect volatility, tax planning, mergers and acquisitions and performance-related pay, he added.

"Failure to face up to the challenge, in particular the potential for greater earnings volatility, could seriously undermine the confidence of investors, analysts and regulators," he said.

The changes will require Irish companies to change the way in which profits and earnings per share are reported.

Just over one-fifth of the organisations surveyed believe that their financial results will be more volatile as a result of conversion to IFRS.

Two-thirds of financial institutions surveyed believe that adoption of IFRS will make it easier for them to raise capital globally, while 65 per cent expect that the new standards will lead to improved governance and transparency.