Analysis of factors affecting the adoption of IFRS in an emerging economy

Abstract

This study examines the factors that facilitate or impede the voluntary adoption of International Financial Reporting Standards (IFRS) in an emerging market. We propose practical solutions that are necessary for successful IFRS implementation in enterprises. To collect research data, we surveyed 350 enterprises in Vietnam using a non-probability convenience sampling method. Using qualitative research methods (through case studies and expert surveys) combined with quantitative and structural equation modelling (SEM), this study analyses the causal relationship between the influencing factors and enterprises' willingness to apply IFRS voluntarily. Evidence indicates that compliance with accounting regulations and principles, qualifications and experience of accountants, accounting regimes and government circulars, capabilities and perceptions of managers, and the benefits of IFRS adoption positively impact the application of IFRS. In addition, the factors of firm size and audit activities have a positive effect on promoting the willingness of enterprises to apply IFRS, while tax pressure and accounting psychology negatively affect the application of IFRS. By contrast, tax pressure and accounting psychology harm the application of IFRS. The study has limitations regarding the sample size, geographical scope, and sampling method. Even so, together with other studies drawn in alternative contexts, our findings are helpful to account for policymakers, regulators and businesses in different emerging countries to adopt IFRS in their countries successfully. The new insights gained in this study can help overcome the limitations of the conventional IFRS approach and design appropriate policies and roadmaps to improve the applicability of IFRS. The present study contributes significantly to the theory and practice at the end of the preparatory phase and the beginning of the voluntary phase of IFRS adoption in Vietnam. This is also the period where Vietnamese policymakers have announced their strategic plan for full IFRS adoption by 2025.