New rules to hit AIB earnings

AIB has said that new accounting standards introduced at the start of this year would have raised 2004 earnings by about 2 per cent had they been in force.

The bank also indicated that the new international financial reporting standards (IFRS) will reduce its earnings per share (EPS) forecasts for 2005 by about 5 per cent.

The bank's director of finance and enterprise technology, Gary Kennedy, told analysts yesterday that the new standards would "reflect business decisions but not drive them".

IFRS will change the way AIB and other companies report their financial performance across a number of headings.

At a briefing in London, Mr Kennedy said the main reason for the increase in the 2004 earnings per share number was a requirement under IFRS for the bank to write back goodwill.

Under the new standards, goodwill can no longer be amortised - or written off over a number of years - but will instead be subject to an annual impairment test.

This would have added 9.2 cents to AIB's reported EPS of 122.9 cents for 2004, or would have boosted pre-tax profits by €78 million. Working against this, however, are a number of IFRS-related drivers that would have resulted in a reduction in EPS.

When these factors - including the treatment of AIB's 22.5 per cent shareholding in M&T Bank - are included, EPS for 2004 would have come in at 125.9 cents.

For 2005, AIB had been forecasting EPS of between 142 and 144 cents under old accounting rules.

Under the new system, the bank is expecting to bring in EPS of between 135 and 137 cents.

Mr Kennedy said that IFRS would, in general, lead to a little bit more volatility in AIB's results.

The bank will become the first major listed company in the Republic to report under the new standards when it releases interim numbers later this year.