International Financial Reporting Standards Adoption Research Articles

The impact of IFRS adoption on Saudi Arabia

PurposeThis study aims to examine the implementation of International Financial Reporting Standards (IFRS) in Saudi Arabia. It investigates how the adoption of IFRS has affected four critical areas in the financial statements of publicly listed companies: profit and loss statement, balance sheet, cash flow statement and retained equity statement in Saudi Arabia. The paper also explores the essential factors/drivers that influence the adoption of IFRS and its implication in Saudi Arabia.Design/methodology/approachData was obtained from Saudi Stock Exchange (Tadawul) listed companies from eleven industries in Saudi Arabia. This cross-sectional study analyses critical financial data across eleven distinctive industries. To identify the impact of adopting IFRS, the researchers use a paired t-test to evaluate seven key elements of financial statements underlying the critical areas: non-current asset, current asset, total assets, shareholders equity, non-current liability, current liability and total liability. The sample captures cross-sectional data from well-developed global industries in Saudi Arabia, pre- and post-implementation of IFRS. Thus, the analysis of the sample data gives a representative picture of the population of the Saudi Arabian industry.FindingsThe results reveal significant differences between GAAP and IFRS reporting standards in the measurement, recognition and classification of non-current assets and liabilities. The differences are expressed in the variance between the GAAP and IFRS. Specifically, the differences between GAAP and IFRS demonstrated by the t-value are significant and reliable (respectively, 5.3 and 4.1). Additionally, the t-value is validated by the p-value, which in both was significant.Research limitations/implicationsThe outcomes of this research will benefit accounting information users, practitioners, researchers and regulators. Since Saudi Arabia’s policymakers have mandated the full adoption of IFRS in financial reporting, the study contributes to the adoption of IFRS practices throughout the Saudi industry. Adopting full IFRS standards requires widespread IFRS expertise to cope with the transition.Originality/valueThis study advances research into the perennial issues associated with changes in reporting towards IFRS standards, especially in Saudi Arabia. The contribution to theory and practice enters new and fruitful areas.

The decision to present comparative financial statements in a mandatory IFRS adoption setting

PurposeThis study analyzes the factors behind the decisions made by the largest listed Chilean companies that mandatorily adopted the International Financial Reporting Standards (IFRS) in 2009 to present comparative IFRS financial statements that year. The authors focus on the role of the expected impact of the change in the accounting standards on a company's financial position as a determinant of this decision.Design/methodology/approachThe sample comprises 105 nonfinancial companies, of which 57 decided to present comparative IFRS financial statements (full adoption) and 48 did not (proforma adoption). Logistic regression is employed to model the decision of interest.FindingsThe decision for full adoption is positively associated with the company's expectation that the change in the accounting standards would improve its financial position, albeit only up to a certain threshold, as evidenced by their inverse U-shaped association.Originality/valueIFRS adoption in Chile creates a unique scenario that allows us to contribute to the literature on the determinants of voluntary disclosure by focusing on a specific case in which the decision to disclose comparative financial statements is associated with mandatory IFRS adoption. The present study provides evidence that opportunistic behavior influences this decision.

The Impact of IFRS on Value Relevance of Accounting Information: Evidence from the Indonesian Stock Exchange

This study investigates the relationships between several accounting variables, International Financial Reporting Standards (IFRS) adoption, and stock market prices in Indonesia. The variables of interest include lagged price, book value per share (BVPS), earnings per share (EPS), market capitalization, Revenue, and price-to-earnings (P/E) ratio. We apply multiple regression analysis to examine the influences of these factors on stock prices. Our preliminary findings suggest that EPS and BVPS have a significant positive association with market prices, aligning with existing literature and highlighting the importance of these measures for investors. Additionally, our results indicate that IFRS adoption improves the value relevance of accounting information in the Indonesian market. We also explore potential size-related variations in the impact of IFRS adoption on the value relevance of accounting information. This study contributes to the ongoing debate on the effectiveness of IFRS and provides insights to investors, policymakers, and practitioners about the factors influencing stock prices in Indonesia.

Does IFRS adoption enhance foreign ownership? Empirical evidence from French listed companies

This paper examines the moderating role of corporate governance mechanisms on the relationship between mandatory international financial reporting standards (IFRS) and foreign investors’ ownership. This study is based on a sample of French firms listed on the SBF 120 stock index with an observation period from 2002 to 2012. The results show that IFRS adoption leads to an increase in foreign equity in the French firms. This is consistent with the idea that international accounting harmonization improves financial statements comparability and transactions transparency which attracts more foreign investors. We also show the role of governance mechanisms as means of IFRS enforcement. In fact, the increase in foreign investors’ ownership depends on effective enforcement. However, for the French case, only BIG four auditors are efficient in enforcing IFRS adoption while independent board members have close relationship with managers which results in a passive attitude. Our findings imply that information quality has an important role in decision making. But they also show that IFRS adoption should be joined by efficient enforcement tools to conduct presumed benefits.

IFRS adoption, firms’ investment efficiency and financial reporting quality: a new empirical assessment of moderating effects from Saudi listed firms

PurposeUnder a gradual long-term plan of the Saudi Stock Market (TADWUAL) from 2016, Saudi Arabia decided to work with International Financial Reporting Standards (IFRS) board to fully adopt its accounting standards. Saudi Arabia has undergone several reforms in governance and standards of internal controls are changing rapidly. This study aims to assess whether IFRS adoption has any moderator role in the relationship between disclosure quality and firm-specific characteristics in the Saudi Stock Market.Design/methodology/approachThis study assesses whether IFRS adoption has any moderator role in the relationship between disclosure quality and firm-specific characteristics in the Saudi Stock Market. The key research hypotheses postulate that compared to IFRS status, after adoption, several independent variables influence the disclosure level. The analysis covers a local sample of 184 Saudi listed firms over the period 2016 to 2020. Using an in-depth content analysis technique, the voluntary disclosure and number of annual report pages are measured manually and year by year to capture levels and unique characteristics. The authors apply cross-sectional regression, first difference method, Pooled OLS and feasible general least square estimations. The mean of disclosure level increases from 33.03% in 2016 to 56.14% in 2020.FindingsThe results reveal that the vast majority of firm-specific characteristics were significant in pre-IFRS adoption period. First difference analysis shows a significant impact of firm size and non-executive composition on the disclosure level. The authors confirm that IFRS adoption plays a critical role in the quality of firms’ financial reports and supports to create a conducive economic environment in Saudi Arabia.Practical implicationsFirst, the implementation of IFRS adoption should impact the Saudi accounting information and disclosure quality in Saudi context markedly. Second, firm-specific characteristics align with corporate governance are the main determinants of accounting information and transparency; therefore, focusing on this angle enables regulators and policymakers to mitigate uncertainty and asymmetric information. Third, the findings of this research state that there is a negative relationship between disclosure quality and board meetings. This encourages policymakers to reconsider the number of board meetings in firms that was not as high as in the developed markets. Notwithstanding all previous implications, it is recommended that future research undertake a various quasi-experimental design such as a difference-in-difference approach to estimate the causal effect of corporate governance mechanisms on IFRS 7 mandatory disclosure requirements on in Saudi Arabia context.Social implicationsThere is a lack of studies on this realm and such as these studies will enrich the understanding of aspects of IFRS adoption and contribute to the prior empirical literature. Importantly, the extend of this sample into other Gulf Cooperation Council countries and exhibition the difference effect can be very useful to enrich the knowledge of IFRS adoption aspects in corporate disclosure and accounting information quality.Originality/valueSaudi Arabia has undergone several reforms in governance, and their standards of internal controls are changing rapidly. This has been attributed to the importance of providing guidelines, practices and regulations for listed companies. One of the major turning points of financial reporting quality in Saudi listed firms was adoption of IFRSs. This adoption deems to be necessity in ensuring the highest level of transparency and information reliability. Based on the findings of this research, the present investigations set up a platform and furnish many implications for policymakers, companies’ board of directors, financial analysts and other related authorities. The results should provide policymakers with greater insight of the relationship between disclosure quality and corporate-specific characteristics throughout the IFRS adoption periods. Thus, the results derived from this study can be effective and useful for the IFRS adoption committee in the Saudi Organization for Certified Public Accountants (SOCPA). According to the best of the authors’ knowledge and based on official secondary information sourced from the SOCPA website, there are several standards that are subject to difficulties in measurement and are modified from time to time, such as: IFRS1, IFRS8, IFRS12, IFRS16 and IFRS18.

Explaining IFRS reluctance with case study vignettes

Purpose This study aims to analyze why listed Taiwanese firms uniquely rejected the early adoption of International Financial Reporting Standards (IFRS) in 2012. It investigates the underlying decision-making processes behind this policy reluctance to further understand the continuous phenomenon of rare voluntary IFRS adoption. Design/methodology/approach It reports on fieldwork evidence obtained in situ by in-depth interviewing in Mandarin. It uses qualitative methods, complemented by quantitative cost-benefit metrics of IFRS adoption. It presents five diverse illustrative case-study vignettes, using a judgment sample based on expert opinion. Findings While the net-benefits of implementing IFRS varied across firms, this study’s unanimous finding was that no firms (in the sample or population) adopted IFRS early, despite stated intentions to the contrary. The key reasons for shunning early IFRS adoption were found to be frequent changes in regulations, insufficient benefits from adopting IFRS and the undermining of comparability across companies, compounded with scarce preparation time. Further, this study found that the Taiwanese accounting regulator’s reluctance toward IFRS adoption, partly caused by a long-standing US influence, contributed to this anomalous outcome. Practical implications This study recommends two critical policy changes: more realistic timelines and less frequent regulatory changes. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the reasons behind the anomaly of no early adoption of IFRS in Taiwan, using new primary data and illustrative case studies. Its novelty lies in extending understanding beyond the existing quantitative literature on accounting standards, using new “thick” qualitative evidence on motives for such choices and decision-making processes, which have been neglected in previous work.

International Financial Reporting Standard Adoption and Value Relevance of Accounting Information of Listed Deposit Money Banks in Nigeria

The study examined the effect of International Financial Reporting Standard (IFRS) adoption on value relevance of accounting information of listed deposit money banks (DBMs) in Nigeria for the period from 2007 to 2020. The pre IFRS adoption period spanned from 2007 to 2011 while post adoption period spanned from 2012 to 2020. The study adopted an ex-post facto research design because the study is purely secondary in nature. The population for the study consisted of all the 15 deposit money banks listed on the Nigerian Exchange Limited as at 31 st December 2020, with a sample size of 12 banks. The Ohlson model was adopted for the study. Using ordinary least square regression, the study found out that post IFRS adoption model has more explanatory power than the pre IFRS adoption period. Also, earning per share moderated by IFRS has a positive and significant effect on market price per share and book value per share moderated by IFRS has negative and significant effect on market price. The study concluded that earning per share is more value relevant with IFRS adoption of the listed deposit money banks in Nigeria while the value relevance of book value decreases with IFRS adoption of listed deposit money banks in Nigeria. The study recommended among others that prospective investors, shareholders, owners, and users of accounting data should place a greater emphasis on earnings per share, which has the strongest positive link with the market share price of listed DMBs in Nigeria

Impact of mandatory IFRS adoption on foreign direct investment: the moderating role of conflict of interest regulation

PurposeThis paper aims to examine the moderating effect of conflict of interest regulation (CIR) on the relationship between mandatory of International Financial Reporting Standards (IFRS) adoption and foreign direct investment (FDI) in the Middle East and North Africa (MENA) region.Design/methodology/approachThe study was conducted based on panel data from 15 MENA countries during the period 2008–2020. Collected data were analyzed by using the generalized method of moments estimation technique.FindingsThis study results show that both mandatory of IFRS adoption and CIR do not have a significant effect on FDI inflows in MENA region; however, their interaction has a positive and significant effect on FDI inflows. This implies that more development of CIR enhances the impact that mandatory of IFRS adoption has on FDI inflows.Practical implicationsThis study results are very useful to policymakers and regulators in the MENA region. The mandatory of IFRS adoption on its own does not improve significantly FDI inflows. The MENA countries should look inwards into more developed CIR that would support IFRS adoption to attract more FDI.Originality/valueTo the best of the author’s knowledge, this is the first research study to investigate the moderating effect of CIR on the relationship between mandatory of IFRS adoption and FDI inflows. In addition, the empirical researches on the effect of mandatory of IFRS adoption as issued by the International Accounting Standards Board (IASB) on FDI inflows for MENA countries are almost absent.

Sustainability Policy Disclosure, International Financial Reporting Standards Adoption, and Audit Report Lag among Listed Nigerian Firms

Sustainability Policy Disclosure, International Financial Reporting Standards Adoption, and Audit Report Lag among Listed Nigerian Firms

Mandatory IFRS adoption and earnings management: The role of culture

Using a sample of 7936 firm-year observations and 922 International Financial Reporting Standards (IFRS) adopter firms from 19 countries that mandated IFRS adoption in 2005 and 922 benchmark firms from 8 countries that did not mandate IFRS adoption in the sample period, we examine the role of trust in the effect of IFRS adoption on earnings management. Consistent with our predictions, we find (1) the earnings management-increasing effect of IFRS adoption is more pronounced in low trust countries/societies after control for country-level institutions, and (2) IFRS adoption decreases total earnings management in high trust countries/societies.

IFRS adoption and foreign direct investment in Sub-Saharan African countries: Does the levels of Adoption Matter?

This study makes an effort to determine how international financial reporting standards (IFRS) adoption levels affect net FDI inflows to sub-Saharan African (SSA) countries using a panel data spans from 2005 to 2020. The results of the two-step system’s generalized methods of moments (GMM) estimation reveal that while both partial and full adoption is found to be insignificant, the sign is negative for full IFRS adoption. However, a statistically significant and positive effect of the interaction between institutional attributes and full IFRS adoption has been discovered. Among other factors controlled, the most significant influencing FDI flows to Africa are found to be infrastructure, trade openness, and human capital. The empirical result is used to derive some policy implications.

Impact of IFRS adoption on the disclosure of management forecasts by industry concentration

ABSTRACTWe aim to investigate the impact of the adoption of the International Financial Reporting Standards (IFRS) on a firm’s strategic voluntary disclosure decisions under different product market conditions. In the corporate world, firms tactically decide the level of voluntary disclosures considering their benefits, like resolving information asymmetry in the financial market, and costs, like providing proprietary information to their rivals. The adoption of IFRS has affected the demands in the financial market for complementary information, and therefore, it would affect the incentive to withhold corporate information in consideration of proprietary costs in the product market. Using a sample of Korean firms, we find that the likelihood of withholding management forecasts in concentrated industries is weaker in the post-IFRS adoption phase than in the pre-IFRS adoption phase. This is because there are greater demands for corporate disclosures for firms in concentrated industries in the post-IFRS adoption phase than earlier. Moreover, we find that the influence of IFRS on the decision of firms in concentrated industries to disclose management forecasts is significant only for firms with higher market power and higher financial leverage.

Benefits and costs of adopting international financial reporting standards

The application of international financial reporting standards (IFRS) plays an important role in improving the quality of enterprises’ financial statements. At the same time, adopting IFRS makes it easier for companies to access foreign capital. Therefore, the use of IFRS is indispensable for Vietnamese enterprises, especially for companies listed on the stock market. This study was conducted to evaluate the effects of benefits and costs on Vietnamese enterprises’ choice to adopt IFRS. The research surveyed 157 companies. The results of regression analysis using Statistical Package for Social Sciences (SPSS) software show that benefits have a positive impact on Vietnamese companies’ decision to adopt IFRS. On the other hand, costs have a negative impact on IFRS adoption. Based on the results of this study, the trade-off theory is used to explain the relationship between the costs and benefits of applying IFRS. When businesses find that the costs are too great for the company or are not yet balanced by the benefits, they do not apply IFRS. Therefore, business leaders have a correct understanding of the difficulties and challenges of converting to IFRS and have a scientific, methodical, and clear plan and roadmap for the transformation. The authors also offer some suggestions for improving the application of IFRS.

IFRS adoption, stock price synchronicity and firm-specific information in Indonesia stock market

This is the first study to explore the impact of Indonesia’s adoption of International Financial Reporting Standards (IFRS) on information flow and stock price informativeness throughout the pre-IFRS (2007–2011), transition (2012–2014), and post-IFRS (2015–2019) adoption periods, as determined by stock price synchronicity (SYNCH). This study examines if IFRS has reduced Indonesia’s SYNCH. The empirical data show that the mean value of SYNCH was negative for each of the 13 years investigated in this study, with the post-IFRS period having the lowest value. After that, SYNCH values steadily recovered. This study used panel data regression to objectively examine the relationship between a variety of independent variables and SYNCH. This research found that requiring the adoption of IFRS will first boost the flow of private information (firm-specific information) into stock price formation and eventually reduce the surprise impact of future disclosed information. This study also contributes new knowledge by offering proof of the effects of IFRS adoption and helping standard-setters in weighing the pros and disadvantages of their choices to keep implementing IFRS in Indonesia.

Análisis del Impacto de la Norma Internacional de Información Financiera (NIIF) en las PYMEs Ecuatorianas

The adoption of the International Financial Reporting Standard (IFRS) in Ecuadorian SMEs has posed several challenges and opportunities. The study addresses the lack of adequate accounting and financial infrastructure, lack of trained personnel, and high transition costs as the main obstacles for SMEs. Despite these challenges, IFRS adoption has improved the transparency and comparability of financial statements, facilitated access to financing, and improved internal management. Effective strategies include training programs, implementation of appropriate technology and specialized consulting. Successful experiences demonstrate that, although adoption can be costly and complex, it offers significant benefits such as increased investor confidence and competitiveness in the global marketplace. This analysis concludes that, with the right support and a gradual transition, SMEs can overcome the challenges and take advantage of IFRS, thus improving their sustainability and market position.

Quality of Financial Reporting: Differences Before and After IFRS Adoption in Basic and Chemical Industry Companies Listed on the Indonesia Stock Exchange

The purpose of this study was to obtain empirical evidence about the differences in the quality of financial reporting before and after International Financial Reporting Standards (IFRS) adoption in basic and chemical industry companies listed on the Indonesia Stock Exchange. The sample in this research was basic and chemical industry companies listed in Indonesia Stock Exchange 2007-2010, two years before the adoption of IFRS and two years in the stage of adoption of IFRS by the total number sample was 192. This study used quantitative research methods, multiple regression analysis to test the model attributes of quality of financial reporting. Meanwhile, differences in the quality of financial reporting before and after International Financial Reporting Standards (IFRS) adoption tested by using a comparative test, paired sample t-test. The results of the study that were presented did not indicate differences of the quality of financial reporting as measured by earnings management. Based on the results of tests performed standard deviation values obtained from the equation of DACC amounted 0.2412570 for SAK GAAP and 0.2586949 for SAK IFRS with a significance value was 0.130 at the significance level (alpha) 0.05. Similarly, the results of testing the quality of financial reporting differences as measured by the relevance of values before and after the adoption of IFRS did not show any significant differences. Based on statistical tests, R2 from the equation of RET was 0.078 to SAK GAAP and 0,021 for SAK IFRS. The comparative test (T Test) showed a significance value 0.865 at the significance level (alpha) 0.05.

The International Financial Reporting Standards (IFRS) adoption and value relevance

This research examines the impact of the International Financial Reporting Standards (IFRS) on value relevance (VR). It is reported that most previous studies that address value relevance relationships with the IFRS have found conflicting results. For example, a reduction in VR in the US but it enhances in most reviewed studies (Gao et al., 2022). According to the findings, the impact of implementing IFRS varies from country to country. In the UK, the IFRS adoption has decreased the book value (BV) while in France and Germany, has increased. After adopting IFRS during the financial crisis, the findings also suggest that the VR has fallen in these nations. All financial institutions trading on the stock markets of these three nations serve as a sample for this study. Quantitative methods are used to collect data for this study, while SPSS is used for statistical analysis. The data was analysed prior to IFRS (2000–2004), for the global financial crisis of 2008, and later IFRS (2006–2015). This study adds to accounting knowledge by analysing the results of IFRS adoption throughout the time frames. In addition, it helps accounting standards setters and policymakers in developing IFRS quality and establishing related policies.

An investigation on significance of adoption and implementation of IFRS for SMEs in malawi among non-incorporated construction companies: A study of selected SMEs in blantyre

SMEs have come to accept the importance of harmonizing accounting information to remain in today's business environment. Hence, for better continuation of rendering their services, SMEs are required to keep books of accounts bound by the statutory rules of Malawi. In 2009, the IASB developed and published IFRS for SMEs in response to the need for high-quality internationally comparable and transparent financial information. The objectives of the study were to investigate the significance associated with the adoption and implementation of IFRS (International Financial Reporting Standards) for SMEs among non-incorporated construction companies in Malawi, to measure the extent of adoption, the mechanism to promote adoption, and related problems for the adoption of IFRS for SMEs. To achieve the determined objectives, the study was conducted and the questionnaire guides were distributed. The sample was selected based on non-probability sampling from the greater area of Blantyre contractors coming up with 30 participants. The collected facts were analyzed using SPSS to obtain tables, pie charts and bar graphs from which conclusions, recommendations as well as areas for further research were made. The investigation revealed that 60% of the construction companies did not adopt IFRS for SMEs. Little effort has been made by the council to encourage the adoption of IFRS for SMEs. The benefits one could accrue in adopting the standard include building strong investors and other stakeholders' confidence, enhancing comparability, and easy access to bank loans due to better credit rating, tax compliance, increased transparency, and accountability, and played a big role in making effective decisions. This study recommends the need for continuous education, awareness campaigns, and communication to contractors on issues associated with IFRS for SMEs and should commence in earnest. Furthermore, a rigorous IFRS for SMEs capacity-building programs should be embarked upon by regulatory bodies (the NCIC in corroboration with ICAM) and training institutions to provide the required manpower for the successful implementation of the IFRS for SMEs.

Auditors' Perceptions toward Challenges and Attitudes of Adopting International Financial Reporting Standards

The objective of this study is to examine auditors' perceptions on the challenges and attitudes toward the implementation of the International Financial Reporting Standards (IFRS). In this study, questionnaires are collected from auditors. The questionnaire is composed of 13 items that are measured using Likert scale. The responses were used to measure participants' perceived challenges and attitudes towards IFRS adoption. The survey ends with two open-ended questions to supplement the quantitative component of the study in providing insights, via participants' voices, into the challenges of IFRS adoption. For the quantitative component, the Statistical Package for Social Sciences (SPSS) has been utilized and a qualitative data analysis software package (NVivo) is used to analyze qualitative data collected from the open-ended questions. Analysis of both quantitative and qualitative data indicates that auditors support the adoption of IFRS. The qualitative component highlighted the importance of training auditors on the implementation of IFRS to ensure effective integration of the accounting standards. Training, knowledge sharing and professional practice are identified as key factors in facilitating effective adoption of IFRS. The findings suggest that adopting IFRS necessitates the development of well-thought-out training programs that consider the implementation process with a local insight.

Unveiling the alliance between corporate board composition and earnings management through meta-analysis

Misconduct in the financial sector, such as earnings management, has garnered significant attention from researchers due to the peculiarities of managers in financial reporting. Effective corporate boards have the potential to limit managerial opportunism in this regard. However, the existing literature yielded inconclusive results. Therefore, the present study aims to examine the influence of corporate board characteristics on earnings management through meta-analysis. The dataset comprises 72 published empirical studies with 3,66,417 firm-year observations. A two-step methodology is adopted following the PRISMA guidelines proposed by Moher et al. (2009) and the meta-analytic technique propounded by Hedges and Olkin (2014). The major findings of the study uncover that active, gender-diverse and larger corporate boards are most influential in controlling earnings management practices. Furthermore, different discretionary accrual measures, corporate governance systems, and the International Financial Reporting Standards (IFRS) adoption moderate the association between earnings management and board composition. The study provides a quantitative generalization to the inconclusive outcomes of published empirical studies from different timeframes and jurisdictions. The findings may help academicians and researchers to develop a holistic understanding of the impact of corporate boards on earnings management. This is one of the first studies to undertake a meta-analytic review of the association of board gender diversity and board activity as board characteristics with earnings management.