IFRS Adoption Research Articles

Investors’ reaction to banning IFRS use by domestic firms in alternative market

AbstractThis paper analyses the regulatory context, i.e., how IFRS preparers investing in Poland react to banning IFRS use by domestic firms in the alternative trading market (NewConnect) after six years of regulatory arbitrage. In other words, it studies their portfolio investment and foreign direct investment (FDI) outward sensitivity to the end of regulatory arbitrage opportunity given by the alternative market’s regulation in the country where accounting law limits IFRS use to regulated markets and business groups where the parent company uses IFRS. The contribution is built on the natural experiment of prohibition of domestic IFRS preparers issuing shares on the alternative (not-regulated and cheaper) trading market after 2012. The originality is delivered by implementing a de facto measure of IFRS adoption by foreign investors to identify a 69% growth rate of IFRS preparers investing in Polish firms in 2012 (317% growth of Swedish investors and 219% of Portuguese) that dropped to 8% in 2013 and 3% in 2018. Thus, we check whether investing decisions consider opportunities to gain funds or attract other investors and build trust through IPOs on the unregulated market dedicated to start-ups and engaged in R&D activity. We use difference-in-differences, GMM dynamic panel-data analysis with Arellano-Bond and Arellano-Bover/Blundel-Bond estimators for the Knowledge-Capital model on portfolio investment, outward FDI overall, and three FDI components based on debt, equity, and earning reinvestment in 2003–2019. We found that banning IFRS use by domestic firms in the alternative market discourages portfolio investments, debt-based FDI flows and FDI earnings reinvestment. Also, total FDI and equity-based FDI from countries with more IFRS preparers have been reduced since 2013 due to the IFRS ban for domestic firms.

The impact of IFRS introduction by listed Moroccan companies on financial performance: The mediating role of the cost of capital

This study aims to examine the direct and indirect impact of IFRS adoption on the financial performance of Moroccan companies listed on the Moroccan financial market. The analyses are based on data drawn from the financial statements of 21 Moroccan companies listed on the Casablanca Stock Exchange. By measuring financial performance using three stock market measures, namely the Mariss ratio, the Price Earnings Ratio, and the Tobin Q ratio, and using the structural equation method with SPSS AMOS software, the results indicate that before the introduction of the cost of capital variable, IFRS significantly affect financial performance, with an estimated coefficient of 0.395 significant at the 5% threshold. By introducing the cost of capital variable, the results show that the direct and significant relationship between IFRS and performance disappears, recording an estimated coefficient of 0.241 with a non-significant probability level of 0.243. On the other hand, the results show that the estimated coefficients for the indirect effect of IFRS on financial performance are negative, i.e., a coefficient of –0.099 estimating the direct effect of IFRS on the cost of capital and a coefficient of –2.621 estimating the direct effect of the cost of capital on financial performance, significant at the 1% and 5% thresholds, respectively. This confirms the hypothesis that the transition to IFRS indirectly and totally influences financial performance via the cost of capital variable.

Assessing the Investment Impact of IFRS Adoption with an Investment Euler Equation*

Assessing the Investment Impact of IFRS Adoption with an Investment Euler Equation*

Implications of IFRS Adoption: Enhancing Accounting Quality, Regulatory Framework, and Foreign Direct Investment

Implications of IFRS Adoption: Enhancing Accounting Quality, Regulatory Framework, and Foreign Direct Investment

Corporate Governance Mechanisms And Internet Financial Reporting Of Selected Quoted Manufacturing Companies In Nigeria (2012-2021)

The study analysed online financial reporting practices among listed manufacturing organisations and investigated the level of compliance with regulations. It determined the effect of corporate governance mechanisms on internet reportage of finance among manufacturing firms in Nigeria. These were done with a view to examining the relationship that exists between corporate governance mechanisms and internet financial reporting among Nigerian manufacturing firms. The study adopted a longitudinal research design. For this investigation, secondary data were used. The study's participants comprised 86 manufacturing firms quoted on the Nigerian Exchange Group (NGX) between 2012 and 2021. A total of 22 manufacturing companies were purposefully selected due to the availability of complete data during the research period and the adoption of IFRS. The data was collected from the websites of the manufacturing companies and their certified financial records. The data covered IFRS disclosure items classified into presentation format and content (FASB 2000), percentage of the independent director, composition of board committees, board diligence, audit committee size, non-executive director as part of the audit committee, internal control management (as mandated by CAMA 2003, CAMA 2020, SEC 2011, and NCCG 2018), and control variables (profitability and leverage). The results showed that corporate governance mechanism measured by board size (t = 5.09, p < 0.05), risk assessment (t = 5.34, p < 0.05), board diligence (t = 2.42, p < 0.05) had a significant effect on internet financial reporting, while Audit committee (t=1.8 p>0.05) had no significant effect on internet financial reporting among Nigeria manufacturing firms. The study concluded that corporate governance mechanisms enhanced internet financial reporting of quoted manufacturing companies in Nigeria

Moderating role of voluntary IFRS adoption on earnings management and credit score of private companies

Earnings management practices may be implemented to unduly improve the company's credit score, and in voluntary settings, a company's choice of adopting IFRS can influence the company's credit profile. We conduct an empirical analysis on a representative sample (n = 10,389) of Italian private companies and find that earning management practices improve, whereas a voluntary IFRS adoption worsen a company's creditworthiness profile. We also find that IFRS adoption cancels out the former undue credit profile benefits, further penalising the credit score. Future studies should replicate these analyses for other contexts and using alternative financial measures to improve the generalisability of these findings.

Examining the Impact of Vulnerability and the Law of Justice on the IFRS Adoption Decision

We investigate the impact of vulnerability and the law of justice indicators on the decision to adopt International Financial Reporting Standards (IFRS) by 133 countries. Applying robust Logit and Probit models to 2021 cross-sectional data, we find that the absence of corruption, state illegitimacy, a well-functioning civil justice system, and insufficient public services are helpful for IFRS adoption. On the other hand, results show that a country’s uneven economic development and human rights violations are detrimental to IFRS adoption. Our research confirms that requiring higher standards for financial and accounting reporting in the media, allocating sufficient budget amounts to support an equitable civil justice system, and coordinating efforts to reduce or eliminate economic inequality may help IFRS adoption. We argue that highlighting the positive benefits of IFRS adoption and the commensurate constructive policy outcomes may add the emphasis needed to convince governmental leaders to move toward IFRS adoption.

Adoption of IFRS 15 in Brazilian companies and its consequences on analysts' forecasts

Adoption of IFRS 15 in Brazilian companies and its consequences on analysts' forecasts

Assessing the Economic Impact of IFRS Adoption on Financial Transparency and Growth in the Arab Gulf Countries

This paper examines the impact of adopting IFRS on economic growth and further development in the Arab Gulf countries, with a particular focus on Saudi Arabia, UAE, Qatar, Oman, Kuwait, and Bahrain. It, therefore, answers the research question of how IFRS adoption affects financial transparency, regulatory frameworks, and economic stability in general in oil-dependent economies. Using data from 2010 to 2020, the research uses regression models to test the influence of IFRS adoption on several key economic indicators. The results, thus, indicate that the adoption of IFRS considerably increases the level of transparency and, hence, enables the inflow of FDI as well, therefore ensuring economic growth. This result also sheds light on the critical roles that regulatory solid frameworks and political stability play in amplifying the benefits of IFRS adoption. However, family-based and state-owned enterprises’ resistance to increased demands for transparency is an issue that would provide a challenge. Implications for policy will be such that comprehensive reforms will be required with the countries’ regulatory frameworks, including more transparency and fitting the IFRS guidelines into local business practice and the cultural context. Future studies should also underscore sector-wise impact and go deeper into how cultural and institutional factors impact the effectiveness of implementing IFRS in the Arab Gulf region.

Global standards, local impact: The adoption of IFRS in Vietnam’s commercial banks

Global standards, local impact: The adoption of IFRS in Vietnam’s commercial banks

Adoption of IFRS in emerging companies: challenges and implementation strategies

Adoption of IFRS in emerging companies: challenges and implementation strategies

A Study of the Implementation of PSAK 74 on Firm's Value of Insurance Companies in Indonesia

Firm’s value plays an important role for both company management and investors in investment decisions. Often, net profit or revenue is closely related to the creation of firm’s value. This research examines whether the application of the Pernyataan Standar Akuntansi Keuangan (PSAK) or Indonesian Financial Accounting Standards Board 74 affects company value as measured using Tobin’s Q. Standards for insurance company contracts have changed based on the adoption of IFRS 17, and are still being prepared and conducted in-depth studies. This research uses a quantitative approach with panel data regression testing using STATA. Data was collected in the form of secondary data on insurance companies listed on the Indonesia Stock Exchange from 2012 to 2022, using a purposive sampling method. The results of the research show that operational profit (loss) from the new face of insurance company financial reports has a positive effect, while insurance company investment profit (loss) has a negative effect on company value. This research expands the study of the implications of implementing PSAK 74 for insurance companies in the future.

IFRS 9 and earnings management in Eurozone banking: The moderating effect of gender diversity

AbstractThe present study examines the effect of adopting IFRS 9 on earnings management practices in European Central Bank‐supervised banks, considering the possible moderating effect of gender diversity in this relationship. Using a system GMM methodology, findings suggest IFRS 9 promotes transparency and contributes to a decrease in earnings management, as the new impairment model influences directors' discretion. We also find that gender diversity moderates the negative impact of IFRS 9 on earnings management. However, when the board representation of women is substantial, the adoption of IFRS 9 results in an undesirable turn, as women are more conservative and risk‐averse, which leads to measures of very early prevention of future losses.

The Need, Challenges, and Prospects of IFRS Adoption in the United States

Academic research shows that IFRS-based financial statements enhance transparency and comparability of financial statements. However, Securities and Exchange Commission, the regulatory body in the United States, continues to refuse to require or permit domestic companies to use IFRS. There exists a robust demand for IFRS in the United States. Though there are some obstacles in the path of IFRS adoption, these are not considered insurmountable and adoption of IFRS will provide US companies with much needed flexibility.

Perspectives of accounting professionals about the adoption of IFRS for SMEs: the case of Romania

Perspectives of accounting professionals about the adoption of IFRS for SMEs: the case of Romania

Analyst coverage and real earnings management: Does IFRS adoption matter? UK evidence

This study examines the impact of analysts coverage on real earnings management (REM) decisions. The study further investigates the effect of mandatory IFRS adoption on the relationship between analyst coverage and REM. We constructed a sample of UK non-financial listed firms for the period 1997–2021. The results demonstrate that firms followed by a large number of financial analysts record higher levels of earnings management. This result supports the contention that high intensity of analyst coverage imposes extra pressure on firms' managers to meet analysts' earnings per share (EPS) expectations, motivating a higher level of earnings management. Contrary to expectations, the introduction of IFRS fails to strengthen the monitoring role of security analysts on firms' management: rather, managers utilize the inherent flexibility and available discretion in the principles-based IFRS to meet analysts’ benchmarks by means of REM activities. These results are robust after controlling endogeneity.

Comparative Analysis of Accounting Information’s Quality Pre and Post IFRS Adoption

Adoption of IFRS in Indonesia began in 2008, namely the initial adoption stage of IFRS based on Indonesia's commitment to support its achievements in one global accounting standard at the G20. IAI itself formulated the full adoption of IFRS in several stages, namely (1) the initial stage of IFRS adoption which began in 2008, (2) the convergence stage of preparation for full adoption of IFRS in 2010, (3) the first stage of full adoption of IFRS which began in 2012, (4) the second stage of full adoption of IFRS in 2015, (5) the third stage of full adoption of IFRS in 2018, (6) and the fourth stage of full adoption of IFRS in 2020. IFRS adoption is sought as a form of improving good financial reporting in improving quality of accounting information. This research will examine differences in the quality of accounting information before and after full adoption of IFRS. This research will take a sample of telecommunications sub sector companies,healthcare, and consumer non-cyclical registered as a member of the BEI. This research examines the value relevance of Ohlson's stock price proxy. The analysis technique used is paired sample t-test with a significance level of 5%. This research concludes that the full adoption of IFRS stage one has contributed to improving the quality of accounting information. This research shows that the quality of accounting information as seen from its value relevance will increase followed by a high increase in disclosure.

The History of IFRS in Russia in 1991–2021

ABSTRACT The authors analyze the trends in the application of IFRS in Russia in the post-Soviet period between 1991 and 2021. The research relies on Russian regulatory legal acts, scientific and professional publications, and the data describing the development of accounting practices in Russia. The study reviews the scale of proactive adoption of IFRS by Russian companies in the 1990s and 2000s. It also evaluates the legal support of the transition to IFRS in Russia, including the legal requirement of IFRS filing for the consolidated financial statements of Russian companies. The article reviews the Russian accounting standards in terms of their compliance with the IFRS. The authors analyze the adoption of IFRS by the public sector as well as by small and medium-size enterprises. The transition to IFRS was a natural response to the key macroeconomic processes that have changed Russia over the past 30 years of its post-Soviet reality. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M40; M41; M48.

Firm Type and Unconditional Conservatism: The Indian Experience with IFRS Convergence

This paper investigates how private and public firms vary with respect to unconditional conservatism in financial reporting in the pre and post IFRS worlds. I consider unconditional conservatism (UC) which pre-empts the more commonly studied conditional conservatism, private firms that are differently regulated, IFRS convergence instead of the more uniform IFRS adoption and an emerging market. Using a large Indian sample of 63,000 observations across more than 15,500 firms (~41% are private) over 10 years (2011-2020), I show that private firms are less unconditionally conservative than public firms. Also, contrary to literature, IFRS convergence increases conservatism in India and reduces the conservatism gap between private and public firms. These results hold even after controlling for monitoring, governance, and group-affiliation. This adds significantly to our understanding of how the effect of uniform accounting standards on reporting choices of different firm types varies significantly by and within a context and region.

From IAS 14 to IFRS 8: the role of proprietary and agency costs in shaping financial reporting

ABSTRACT The relevance of segment reporting has prompted regulatory bodies to place significant efforts in refining the existent segment reporting regulation. The introduction of the IFRS 8 ‘management approach’ in the segment reporting regulation was anticipated to facilitate a better understanding of the company’s diverse businesses and regions, providing an opportunity to improve segment reporting disclosures. However, the effectiveness of segment reporting regulation is heavily influenced by the country regulatory environment and the characteristics of the firms. We exploit the Spanish institutional setting to provide further evidence on the real impact of IFRS 8 adoptions. Our findings support the notion that the adoption of IFRS 8 has yielded few benefits to segment reporting. Importantly, our research reveals that segment disclosures have not exhibited heightened responsiveness to proprietary costs and have shown only a moderate response to agency costs after the adoption of IFRS 8.M41, M48