THE IMPACT OF MANDATORY ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS (IAS/IFRS) ON THE RELATIONSHIP BETWEEN ACCOUNTING ESTIMATES AND CASH FLOWS: AN EMPIRICAL STUDY

Abstract

This paper aims to investigate the impact of the mandatory application of international accounting and financial reporting standards (IAS/IFRS) on the relationship between accounting estimates and future cash flows of Iraqi banks, the research sample listed on the Iraq Stock Exchange. The research sample included a large number of commercial banks listed on the Iraq Stock Exchange, including (18) banks for a ten-year time series from 2011 to 2020. The problem and hypotheses of the research focused on whether there was a discrepancy in the levels of accounting estimates and future cash flows for Iraqi banks. The research sample and whether the relationship between accounting estimates and future cash flows has improved in the period after the mandatory application of international financial accounting and reporting standards. The results show that there is a clear and large discrepancy in the difference between the current and future cash flows and the levels of accounting estimates during the research period as a whole and for the period before and after the mandatory application of international accounting and financial reporting standards. Importantly, the research results indicated that the predictive and explanatory power of accounting estimates has increased significantly after the application of international accounting standards in predicting future cash flows from the operational activities of Iraqi banks, the research sample. Accordingly, this may give a higher ability to managers in banks to make decisions more wisely and correctly in light of future expectations related to cash flows from their operational activities. The adoption of international accounting and financial reporting standards (IAS / IFRS) in the Iraqi environment will keep pace with the development taking place in the world, and therefore it is necessary to urge the regulatory authorities in Iraq to the compulsory application of accounting standards and international financial reporting at the level of various business sectors in Iraq Because of the great advantages that the standards enjoy, they will contribute effectively to increasing the quality of reports and financial statements and increasing the quality of accounting work as a whole, which is reflected importantly and positively on the level of the general economy of the country.