The Impact of IFRS Adoption on Quality of Accounting Information: Evidence from Sri Lanka

T G Yasas,H A P L Perera

doi:10.4038/kjm.v8i1.7566

Abstract

The aim of this study is to examine the effect of International Financial Reporting Standards (IFRS) adoption on quality of accounting information in terms of value relevance of listed manufacturing companies in Colombo Stock Exchange. At present, countries are mandated or permitted to apply IFRS in preparation of their financial statements. There are many studies available on IFRS adoption internationally. However, there is no clear evidence that IFRS adoption enhances the quality of accounting information pertaining to Sri Lankan context. This study employs 29 listed manufacturing companies with both pre-IFRS (2009-2011) and post-IFRS (2013-2015) information. Data were analyzed using multiple regression method. Results showed that value relevance of accounting information has not significantly improved in the post-IFRS period than the pre-IFRS period. Further studies are encouraged to conduct on investigating the impact of IFRS adoption on the quality of accounting information by expanding the sample size.

Highlights

Background of the StudyAccounting standards are a set of principles and guidelines which should be followed by companies in preparing and publishing their financial information periodically
This study aims to find the relationship of International Financial Reporting Standards (IFRS) adoption in Sri Lanka with the market price, earnings, equity and operating cash flow of the listed manufacturing companies
The median values for LOG (MVPS), LOG (EPS), LOG (BVE) and LOG (LEV) has been increased in the post-IFRS period compared to the pre-IFRS period but it decreased for LOG (OCF)

Summary

Introduction

Accounting standards are a set of principles and guidelines which should be followed by companies in preparing and publishing their financial information periodically. Listed entities are legally bound to prepare and publish their financial information according to a given set of accounting standards (IFRS Foundation, 2017). All the listed companies in Colombo Stock Exchange were mandated to adopt Sri Lankan Financial Reporting Standards (SLFRS) which is very much identical to International Financial Reporting Standards (IFRS) with effect from 1st January 2012 (Weerathunga and Udaya Kumara, 2015).

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Methods

Results

Conclusion