IFRS Adoption and Financial Results of EU Companies: The Challenge of Nomenclature - Evidence from the UK, France and Germany

Abstract

Since the adoption of International Financial Reporting Standard (IFRS) and the subsequent directive by the EU, all companies are required to report their consolidated financial statements in line with the IFRS prescribed formats. The study examines the consolidated financial statements of top 270 listed companies in three major EU stock exchanges (UK, France and Germany) and found a disparity in the adherence to IFRS reporting guidelines. Inconsistencies in the application of nomenclature such as ‘statement of financial position’ instead of balance sheet and sequence of arrangement of current assets in order of liquidity remain a major challenge for most of the companies. The compliance monitoring machinery of IFRS in the EU is seemingly weak compared with the US GAAP regulatory body where a majority of US listed companies are found to adhere strictly to the prescribed nomenclature and order of arrangement of current assets in their financial statements. The study makes a case for the reinstatement of balance sheet terminology by the IFRS.