Abstract
Using an exploratory interpretive research approach and International Financial Reporting Standards (IFRS) 13 as a case study, this article investigates the factors that affect the decision to adopt a specific IFRS early. The research findings are significant as very little interpretive research has been performed on financial reporting from a South African perspective. The findings reveal that the majority of the interviewees did not elect to adopt IFRS 13 early. Technical constraints – such as the need to provide additional accounting disclosure – discouraged the early adoption of the standard. Factors such as the effect of adoption on earnings, decisions made by competitors and the relevance of the standard to business operations were also considered as part of this decision. Perhaps most significant is the logic of resistance to new standards evidenced by a general dismissal of the view that IFRS 13 provides more useful information to users of financial statements.
Highlights
Research shows that there are benefits of voluntarily adopting International Financial Reporting Standards (IFRS) (Barth et al 2013; Brown & Tarca 2011; Daske et al 2006)
As discussed in the ‘Introduction’ section, there is a large body of work which deals with the adoption of IFRS as whole (Barth et al 2013; Brown & Tarca 2011; Daske et al 2006), but only few articles deal with the decision to early adopt a specific accounting standard
The only difference was that early adopters felt that the benefits of applying IFRS 13 before its effective date would exceed the costs of early adoption, while those who delayed application held the opposite view
Summary
Research shows that there are benefits of voluntarily adopting International Financial Reporting Standards (IFRS) (Barth et al 2013; Brown & Tarca 2011; Daske et al 2006). This article uses IFRS 13 as a case study to evaluate the subtle characteristics of IFRS standards which result in South African preparers electing to adopt a standard before its effective date. It clarifies how to measure fair value rather than expand the use of fair value accounting (Tran 2012). As noted by Tran (2012), the aim of implementing a standard governing fair value is to clarify how to determine fair value and provide consistency across all IFRS pronouncements. An increase in clarity and consistency implies an increase in comparability of the financial information (International Accounting Standards Board [IASB] 2011). This raises the question: would preparers of financial information elect to adopt IFRS 13 early? This raises the question: would preparers of financial information elect to adopt IFRS 13 early? This study investigates what factors affected the decision to adopt the standard early or refrain from doing so, as opposed to focusing on the technical difficulties of the standard
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