Stock Market Reaction to Elimination of the Reconciliation from IFRS to U.S. GAAP in the USA

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Manuscript Type: Theoretical Main topic: A tsunami of regulations since the 2013 financial crisis is steering toward’s Europe’s financial service sector. At the same time the accounting standard for financial institutions core products the financial instruments will be changing. Whenever such new accounting and reporting standards are issued by the IASB (International Accounting Standards Board) and this includes also footnotes, those disclosures become increasingly relevant. The reason for that is that the footnote disclosure represent an important source of information to provide transparency and enable the investor to understand the ex-post implementation business impact. In this paper the focus will be on those new footnote disclosures. As disclosures according to IFRS 9 become compulsary by 2018, the existing IFRS Taxonomy for IFRS 9 al-ready developed by the IFRS Foundation, represents a suitable and objective framework to assess IFRS 9 im-pact on disclosures at an early stage. The specific goal of this paper is to perform a conceptual gap analysis considering the IFRS 9 taxonomy issued by the IASB and the Financial Reporting (FinRep) taxonomy on IFRS 9 issued by the European Banking Authority (EBA). In general, the IFRS Taxonomy is not used very much in practice. This is not understandable as several advantages relate to the IFRS Taxonomy: principle-based accounting standard does very often not define specifically disclosure rules for each and every topic, therefore to derive reporting elements would very difficult to accomplish. A robust taxonomy development and governance process leading to the IFRS Taxonomy simplifies the task of interpretations and the actual expression of reporting elements. The IASB started to perform a review process of the XBRL Due Process in 2013. As a result the development of the IFRS Taxonomy should become part of the general due process of the financial reporting standards. Due to these changes it is expected that the importance of the IFRS Taxonomy will be growing. The FinRep Taxonomy has become mandatory since 2014 for all banks within Europe, to fulfill the regulatory reporting requirements according to the Capital Requirements Directive (CRR) IV. Results: Even though the disclosures for external reporting and for regulatory reporting are based on the same accounting framework the International Financial Reporting Standards (IFRS), differences can be observed with regard to disclosures, which are partly material. These differences become transparent when analysing IFRS- and FinRep-Taxonomy reporting elements. This is caused by the principle-based IFRS, which enable scope of interpretation and the different objectives of the IASB and the banking supervision. Whereas the IASB follows the objective to develop industry non-specific international financial reporting standards, the banking supervision core focus lies on the banking industry. The EBA follows specific information re-quests with the FinRep Taxonomy in the role as banking supervisory. The IASB intends to provide decision useful information for investors. Nevertheless these two taxonomies provide the possibility for a starting point for the harmonization and the development of common practice disclosures, which could counteract against a heterogeneous financial reporting and the issue of “information overload”.

The global wind of economic integration has now reached the doorstep of accounting profession with intense pressure on nations state to apply unified accounting Standards in government undertakings. This effort could be seen as a centaury reform to the profession. The reform agenda was perceived as way forward towards harmonizing public sector with private sector liked system and principle of financial reporting, which for long experts had been advocating on the believed that both sectors should operate at the same level of efficiency. The need for high quality standards to enhance sound and consistent financial reporting and the fact that the inefficiency and ineffectiveness of public sector extended to a belief that public and private sectors did not have to be managed in fundamentally different ways, fostered a wide-ranging discussion about the harmonization of public sector accounting systems and their convergence towards the private sector financial reporting standards. There is no doubt that applying universal high quality standards can promote efficiency, transparency which in long run may promote public accountability. However, the process of adopting a uniform set of accounting standards, as a part of the international convergence of financial reporting systems, is perceived as a very complex, time consuming and difficult task. The trend of international convergence and harmonization policy of private sector accounting and financial reporting standards has also made the influence on the process of entire public sector reform that has been progressing worldwide. According to Ball (2006), since accounting is shaped by economic and political factors, harmonization of accounting standards and practices is almost an inevitable consequence of the increasing integration of markets and policies. This has been witnessed by the mandatory adoption of the International Financial Reporting Standards (IFRS) in several countries in the last decade. The International Accounting Standards Board (IASB) is a private organization of international scope established in 1973. It has issued a set of standards to be used when preparing financial statements, namely 41 International Accounting Standards (IAS) and 13 International Financial Reporting Standards (IFRS). The IAS are standards issued by the IASB by 2001 and IFRS are standards issued after that year. Nevertheless, currently, the expression IFRS is commonly used alone to designate this set of rules (IAS and IFRS). This IFRS adoption worldwide is a significant economic transformation and it gave rise to a major line of research. This paper reviews the empirical literature on the effects of IFRS adoption on financial management and economic transformation with the focus on Cameroon. Empirical research allows evaluating the impact of changing standards on the financial reporting quality, as well as the effects of such a change on the capital market (Douala Stock Exchange), it can also contribute to understanding the factors that influence the consequences of change. This knowledge is important for regulators in Cameroon that are preparing to change standards, but also for national regulators that have already done it when considering ways to improve IFRS implementation. This paper will revisit some cases studies encouraging the implementation of IFRS and IPSAS worldwide and attempt to domesticate the concepts in Cameroon. The first part provides the rationale of IFRS and IPSAS implementation, while the second part gives some international cases studies on IFRS implementation. The last part of the paper gives a roadmap for effective and efficient implementation of IFRS in Cameroon.

This paper investigates whether and how personal characteristics of International Accounting Standards Board (IASB) members are associated with properties of International Financial Reporting Standards (IFRS). Properties of IFRS are captured by linguistic proxies. I document that the overall importance of principles relative to rules in the full set of IFRS decreased over time, while the overall fair value orientation increased. Focusing on single IASB decisions on IFRS changes, I find that members with an auditing background are associated with decreases in the importance of principles relative to rules, while members from common law countries are associated with increases in the importance of principles relative to rules. Furthermore, the results suggest that members with an auditing or financial services background are associated with increases in fair value orientation. This paper is the first to document an association between personal characteristics of standard setters and properties of accounting standards in the IASB setting. Furthermore, I provide detailed descriptive evidence on the time series of IFRS properties and IASB membership.

INTRODUCTION Now that the International Accounting Standards Board (IASB) has emerged from the restructuring of the International Accounting Standards Committee's (IASC) board, it seeks to establish high-quality International Financial Reporting Standards (IFRSs) and to engineer convergence at that level with eight leading national standard setters via a formal process of liaison. One obstacle lying in the IASB's path is the set of political pressures that may be triggered by any board initiative to prescribe specific accounting treatments, eliminate alternative treatments, impose additional disclosure requirements, or tighten the allowed interpretations. I define political to mean self-interested considerations or pleadings by preparers and others that may be detrimental to the interests of investors and other users, a phenomenon that has been associated with the term economic consequences (see Zeff 1978). The IASB's initiatives will prescribe acceptable standards with greater specificity and provide less room for flexibility. Because the European Commission (EC) has given notice that, no later than 2005, all listed European Union (EU) companies must adopt endorsed IFRSs in their consolidated statements, EU companies will see the stakes as being much higher than they were with the standards issued by the old IASC board. Much depends, of course, on how effectively the several countries' regulators enforce compliance with IFRSs. This article relates numerous attempts by industry and other affected parties, both in the U.S. and other countries, to move aggressively to prevent an accounting standard setter from imposing an objectionable requirement. They exemplify the lengths to which the powerful critics of proposed standards will go to defend their self-interests. RECENT DEVELOPMENTS The political pressures may emerge in very different degrees and strength of feeling across the eight countries whose standard setters are to act in liaison with the IASB. (1) Such pressures could impede the effort to achieve convergence at a high level of quality. Lobbying may originate in other countries as well. Already, at the IASB's inaugural meeting with its Standards Advisory Council (SAC) in July 2001, it was reported that a major Swiss company, later revealed to be Novartis, had written to Sir David Tweedie, chairman of the IASB, that it will consider switching from IFRSs to U.S. GAAP if the IASB does not change its standard that requires the amortization of goodwill over 20 years. It was said that Novartis was concerned that it will be placed at a strategic disadvantage if the IASB does not adopt a standard on goodwill that converges with the FASB's Statement of Financial Accounting Standards (SFAS) No. 142. As a Swiss company, Novartis will not be required to continue using IFRSs in its primary financial statements under the EC's 2005 initiative unless the Swiss government passes a law to that effect. Some European companies have other reasons for considering a switch to U.S. GAAP. One researcher has found that the chief financial officers (CFOs) of a number of major Swiss companies are attracted to U.S. GAAP because preparers in the U.S. are well organized and constitute a powerful lobby--a source of comfort to CFOs. (2) As noted below, such bodies as Financial Executives International (FEI, formerly the Financial Executives Institute) and The Business Roundtable have forcefully presented industry's views on proposed accounting standards to the FASB for many years. (The Business Roundtable is composed of the chief executive officers of some 150 of the largest U.S. corporations.) Also at the SAC/IASB meeting in July, Phil Livingston, the full-time president and chief executive officer of FEI, told the IASB that it should leave stock option accounting off of its agenda. He described the exchange of views as tense, and, in a subsequent report to FEI members dated July 25, he recounted what he said as follows: I gave a strong statement that we had been through 10 years of debate on this subject in the U. …

LARGE ACCOUNTING FIRMS’ SURVEY REVEALS EMERGENCE OF “TWO STANDARD” SYSTEM IN THE EUROPEAN UNION

Purpose– The purpose of this paper is to perform a brief examination of International Financial Reporting Standards (IFRS) and the progress towards IFRS convergence in the accounting environments of China and the USA, providing useful information on the current status and future of IFRS convergence in these countries.Design/methodology/approach– A range of IFRS-related literature from 1993 to 2013 was analyzed to provide the current status of IFRS and to determine the past, present and future of IFRS convergence in the country examinations.Findings– IFRS convergence and adoption has occurred on a global scale due to the call for a single set of standards. China's most significant obstacles include training accounting professionals and becoming more involved in the International Accounting Standards Board (IASB) standard setting process. The USA's most significant obstacle is completing the Securities and Exchange Commission roadmap milestones, which will progressively move the accounting industry towards IFRS convergence.Research limitations/implications– These findings have been limited to an overview of IFRS convergence and adoption within China and the USA. Additional research opportunities exist by examining how successful countries have been in protecting individual economic interests by working with the IASB in the standard setting process for the IFRS, as opposed to being passive in the process. One economic indicator that should be examined is foreign direct investment, which has major impacts on country development and can be influenced by financial standards such as IFRS.Practical implications– China and the USA both have milestones identified in this paper that will need to be reached before benefits may be reaped from the converging to IFRS.Originality/value– These findings show that IFRS standards are being implemented globally in many nations, providing a common set of reporting tools to businesses and investors. Through these standards, China and the USA are working to be even more competitive forces in financial markets.

There have been several developments recently, both in the United States (US) and the European Union (EU), which will have consequences in Australia. The two major developments in the US are the decision by the Securities and Exchange Commission (SEC) to drop the reconciliation requirement for foreign registrants that adopt International Financial Reporting Standards (IFRS) and the serious consideration that the SEC is currently giving to allow US publicly traded companies to adopt IFRS. The developments in the EU involve its ever‐lengthening endorsement process and the increasing pressure being brought on the International Accounting Standards Board (IASB) and its oversight body, the International Accounting Standards Committee Foundation (IASCF) trustees, to alter their composition and the character of their operations. At the same time, there has been the FASB's appeal to the EU to accept IFRS without any endorsement process. The developments in the US have been lauded by the IASB and in Europe. They represent an impressive vote of confidence in the IASB and in the efforts being made by national standard setters and securities market regulators around the world. The US has already taken a long stride towards joining the more than 110 countries and other jurisdictions that have committed themselves to allow or require the use of IFRS for some or all reporting entities.

International Financial Reporting Standards (IFRS) are rapidly adopted globally to enhance financial reporting quality. All firms in Oman are required to follow IFRS. In addition, the Accounting Standards Board adopted IFRS in their entirety. The project objective is to test the relationship between the adoption of IFRS and financial reporting in Oman. This research used a quantitative method. The population of this study were 112 companies at Muscat Stock Exchange (MSX) for the year ended 2020 in Oman. The sample size of this project was 92 from three sectors of listed companies (Financial Sector 30, Industrial Sector 32, and Service Sector 30). The project results show a significant positive relationship between the adoption of IFRS and financial reporting in Oman. Firms that were Adopt-IFRS-Effective had high financial reporting quality, while firms that were Adopt-IFRS-Not-Effective did not affect their quality. This is because financial reporting is not solely dependent on these standards but has an impact. The implications of this research result in better-informed judgments for investors as the information included in the annual reports improves comparisons that facilitate the further flow of investments. Furthermore, provides significant insight into the International Accounting Standards Board (IASB). Also, this study has been added to the literature by examining the Adoption of IFRS on financial reporting in Oman context. Besides, this might add benefits to many firms relating to their current accounting standards practice that might lead to adopting IFRS to ensure the application of applicable accounting standards to show fair financial statements to its stakeholders. This current research is one of the first works in the context of Sultanate of Oman. It has added a new discussion to the body of knowledge considering the IFRS and their link with financial reporting quality. Furthermore, conducting such research in the accounting field provides new insight into the IFRS literature among both developed and emerging economies including Oman.

This study reviews expediency and influences of extensible Business Reporting Standard in terms of Financial and Business Reporting Value Chain by implying flow of financial information from business operations to internal and external reporting to end user groups of financial reports. Further, identifies influences, the International Accounting Standard Board (IABS) had on extensible Business Reporting Language (xBRL) and the convergence of International Financial Reporting Standards (IFRS). The IASB had an effect on developing a conceptual framework and integrating xRBL into financial reporting standards together with acceptance and enforcement of these standards at global stage. xBRL has revolutionized financial reporting, as it allows corporate financial information to be aggregated, transmitted, and analyzed faster more accurately — Hoffman and Strand 2001. This research study may diverge due to developments in conceptual XBRL extensions by various sources, for example: IFRS taxonomy, and Canadian XBRL. This paper also examines implementation of IFRS taxonomy, and its current status in Canada with regulatory impacts and benefits of XBRL for Canadian companies. These impacts will be discussed by using literature review along with other aspects of XBRL. In fact, Analyses have been done on changes made in financial statement presentation with new concepts on financial performance and financial position that has emerged due to adoption of IFRS and XBRL web based language. These improvements in financial statements together with additional disclosure requirements may perhaps benefit all stakeholders alike. This paper mainly focuses on structural overview of conceptual XBRL extensions, and changes in financial reporting standards — IFRS, with business information systems re-engineering.

Purpose– This study aims to examine whether the adoption of International Financial Reporting Standards (IFRS) leads to accounting quality improvements in Egypt as a code-law country. In particular, the study examines earnings management, the construct often used to assess accounting quality.Design/methodology/approach– The study compares earnings management practice for Egyptian listed companies before (2000-2006) and after (2007-2009) the adoption of IFRS.Findings– The findings of the study reveal that accounting quality, as measured by earnings management, has decreased in post-adoption period compared to pre-adoption period. IFRS are set up to provide high-quality financial reporting. However, this cannot be achieved solely by a regulatory requirement to follow. The accounting system is a complementary component of the country’s overall institutional system. Institutional improvements did not simultaneously take place by the Egyptian government around the adoption of IFRS. The Egyptian government did not introduce a more effective enforcement system, mandatory corporate governance regulations, investor protection mechanisms and sufficient institutional knowledge of IFRS during that period. Thus, even if IFRS are higher quality standards, the institutional features of Egyptian market could eliminate any improvement in accounting quality arising from adopting IFRS.Research/limitations/implications– The results of the study are consistent with prior research suggesting that the adoption of IFRS, which are generally perceived to be of higher quality than domestic standards, does not necessarily lead to higher accounting quality in code-law countries like Egypt. The overall results indicate that incentives dominate accounting standards in determining accounting quality in Egypt.Originality/value– The main reason why countries adopt IFRS invariably is to improve accounting quality. It is, therefore, of interest to ascertain if this goal has been met, especially, in code-law countries such as Egypt.

[Abstract: To improve comparability of financial statements across countries, the US Securities and Exchange Commission (SEC) and International Accounting Standards Board (IASB) are involved in the convergence process for a single, high quality accounting standards. This paper examines the market’s reaction (price and volume) to IFRS-based earnings announcements of UK listed firms in the US equity markets and assess if US and IFRS accounting principles differences impair the ability of US investors to assess the information contained in IFRS accounting system output. Specifically, this paper tests whether US investors are able to interpret and use IFRS accounting reports in making trading and investment decisions. How US market participants react to IFRS earnings disclosures is important to regulators (e.g., the SEC and the FASB) in their task in improving comparability of financial reporting. This study may contribute to the debate on global convergence with IFRS, particularly convergence between IFRS and US GAAP with respect to earnings measurement. The results provide evidence that unexpected returns and volume of shares traded increased during IFRS-based earnings release dates. The price analyses indicate that US investors use information about UK’s firms IFRS earnings in valuation, and that the US market responses to IFRS earnings differ somewhat to the US earnings. Thus, US market participants do not appear to be confused by US/IFRS GAAP differences, and in fact use IFRS earnings in their valuation of UK firms.

The "International Financial Reporting Standards (IFRS) Convergence Process for Small and Medium-Sized Entities (SMEs)" seeks to address the unique challenges and requirements faced by smaller businesses in adhering to international accounting and reporting standards. This initiative recognizes that SMEs operate in diverse economic environments and have distinct financial reporting needs compared to larger enterprises. The primary purpose of this convergence process is to enhance the relevance, accessibility, and practicality of IFRS for SMEs, fostering consistency in financial reporting practices across global markets.A project to create accounting standards appropriate for small and medium-sized businesses (SMEs) is being worked on by the International Accounting Standards Board. This abstract provides an overview of the convergence process involving International Financial Reporting Standards (IFRS) for Small and Medium Sized Entities (SMEs). With the global landscape of financial reporting constantly evolving, the integration of IFRS tailored specifically for SMEs marks a pivotal transition towards harmonizing financial reporting practices. This paper examines the essential elements and implications of this convergence, addressing the challenges and benefits faced by SMEs as they align with these international standards. The analysis delves into the driving factors behind the convergence, including the necessity for a unified and transparent financial reporting framework, aiming to facilitate comparability and accessibility of financial information across borders. Furthermore, the abstract discusses the potential impact on SMEs' financial reporting quality, decision-making processes, and access to capital. Through a comprehensive review of the convergence process, this abstract seeks to contribute to the understanding of the significance and implications of adopting IFRS for SMEs, thereby providing valuable insights for practitioners, regulators, and stakeholders in the financial reporting ecosystem.

International Financial Reporting Standards (IFRS) have gained acceptance in many countries throughout the world including the European Union (EU), Australia, New Zealand and Canada. IFRS have been adopted by all G20 countries except the U.S. Historically, U.S. has been the opponent of such adoption in the country. However, following worldwide acceptance of IFRS and considering the significance of attaining comparability to facilitate free flow of capital, the U.S. standard setter, Financial Accounting Standards Board (FASB) made a commitment to jointly work together with the International Accounting Standards Board (IASB) to explore the possibilities of convergence of U.S. GAAP with IFRS. Following such move of the FASB, the present study investigates the implications of such adoption in the U.S. The rationale behind such investigation is to delineate the challenges of such possible adoption in the country and outline steps for successful implementation. The study contributes towards existing literature by providing a comprehensive analysis of implications of possible IFRS adoption in the country. The theoretical contribution of the study is the application of institutional theory in a setting of multi-directional institutional pressure. The study contributes towards practice by outlining the status of IFRS adoption in the U.S., delineating the impact of such possible adoption and suggesting steps for successful implementation of IFRS in the country.