Effect Of International Financial Reporting Standards Adoption Research Articles

The transition from the Greek accounting system to IFRS: evidence from the manufacturing sector

Over the past few decades, globalisation and the expansion of business investments and capital markets have led to a demand for high quality accounting information. Regulation (EC) No. 1606/2002 was applied in line with the process of internationalisation, involving the mandatory adoption of International Financial Reporting Standards (IFRS) by all listed European companies from 2005 onwards. The primary objective of this study is to examine whether the mandatory adoption of IFRS in the EU has affected the structure of a specific set of Greek companies reporting under IFRS and under the Greek accounting system (GAS). We therefore conducted our investigation on a sample of 38 Greek manufacturing firms reporting under the GAS and under IFRS for the same year 2004, which also traded on the Athens Stock Exchange (ASE) during the above-mentioned period. The study is based on their balance sheet and income statement figures prepared both under the GAS and IFRS model. We then analysed the quantitative effects of IFRS adoption on key accounting financial ratios in relation to the Greek accounting system. The results indicate that the adoption of IFRS affects the magnitude of accounting ratios, such as the asset turnover ratio, the ratio of owner's equity to total assets, the ratio of total liabilities to total equity, and the ratio of owner's equity to total liabilities.

Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors

Drawing on the academic literature in accounting, finance and economics, we analyze economic and policy factors related to the potential adoption of International Financial Reporting Standards (IFRS) in the U.S. We highlight the unique institutional features of U.S. markets to assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We discuss the compatibility of IFRS with the current U.S. regulatory and legal environment as well as the possible effects of IFRS adoption on the U.S. economy as a whole. We also consider how a switch to IFRS may affect worldwide competition among accounting standards and standard setters, and discuss the political ramifications of such a decision on the standard setting process and on the governance structure of the International Accounting Standards Board. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit tradeoff between (1) recurring, albeit modest, comparability benefits for investors, (2) recurring future cost savings that will largely accrue to multinational companies, and (3) one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. We conclude by outlining several possible scenarios for the future of U.S. accounting standards, ranging from maintaining U.S. GAAP, letting firms decide whether and when to adopt IFRS, to the creation of a competing U.S. GAAPbased set of global accounting standards that could serve as an alternative to IFRS. JEL classification: G14, G15, G30, K22, M41, M42

Enhanced Disclosures Via IFRS and Stock Price Synchronicity Around the World: Do Analyst Following and Institutional Infrastructure Matter?

In this paper, we investigate whether enhanced disclosures via voluntary adoption of International Financial Reporting Standards (IFRS) influence stock price synchronicity or the extent to which firm-specific information is impounded into stock prices. We also study the role of analyst following and institutional infrastructure in determining the relation between IFRS adoption and stock price synchronicity. Our results reveal the following: Enhanced disclosures via IFRS adoption encourage informed traders to collect and trade on private information, which in turn leads to a decrease in stock price synchronicity or an increase in firm-specific return variation. This synchronicity-reducing effect of IFRS adoption is attenuated for firms with high analyst following. Moreover, enhanced disclosures via IFRS adoption encourage private information-based trading to a greater (lesser) extent in countries with poor (good) institutional infrastructures where publicly available, firm-specific information such as accounting disclosures is of low (high) quality.

Implications of the ‘IAS Regulation’ for Research into the International Differences in Accounting Systems

Meek and Thomas (2004) call for research on the continued relevance of ‘rediscovered’ dichotomous accounting classifications. We provide such evidence by examining how developments surrounding the ‘IAS Regulation’ (1606/2002) influenced international differences in accounting systems in the European Union. Since a sufficient time series of actual post-2005 International Financial Reporting Standards (IFRS) reporting practice is not yet observable, we propose an initial re-classification of accounting systems based on evidence available to date, that is, the degree of implementation of the IAS Regulation in the Member States. Consistent with Nobes (1998), we find that the degree of public accountability to outside investors (the ‘public/private’ criterion) is becoming the primary differentiator for accounting systems in Europe, surpassing country-level variables such as legal system and culture. The distinction between consolidated and individual financial statements is the second emerging differentiator. While consolidated accounting is becoming more uniform across countries, cross-country cultural differences are most likely to persist in individual accounting. Based on our analysis we highlight two important areas of future research beyond the consolidated financial statements of listed firms (e.g. Nobes, 2005; Schipper, 2005). First, at the country level, the interaction of IFRS and individual financial statements will need to be reassessed. In addition, research could help introduce a degree of differentiation into financial reporting regulation for unlisted firms, because these firms are not a homogeneous group. Also, the convergence of national GAAP systems with IFRS will benefit from fresh research insights. Second, at the firm level, future research could analyze the extent to which the determinants and consequences of IFRS adoption, an area well researched for publicly traded firms (e.g. Cuijpers and Buijink, 2005), generalize to unlisted firms. Such research will help detect emerging patterns of accounting systems within an international context. It will generate insights into the disconnect of consolidated accounts from national influences, the degree of uniformity of consolidated accounts among international firms, the continued relevance of traditional classifications of international accounting systems for individual accounts and accounts of unlisted companies, and the convergence of national standards with IFRS.