IFRS Adoption Research Articles

The Adoption of IFRS and Earnings Quality of Financial Statements of Nigerian Breweries Plc: Generalised Linear Model Approach

The adoption of IFRS is expected to improve the earnings quality of firms that adopt them. It is against this background that this study investigated how the adoption of IFRS has affected earnings quality of Nigerian Breweries Plc. The company was selected because of its importance to the Nigerian economy. The 18 -year research period (2003 – 2020) was divided equally between (2003 – 2011) Pre- IFRS period (9 years) and (2012 – 2020) Post – IFRS period (9 years). Data on share price and Earnings per Share used to calculate earnings yield and change in earnings yield used to proxy earnings quality were sourced from the published financial statements of the company. Findings from Generalized Linear Model revealed no improvement in the earnings quality of the company after the adoption. Findings further showed that the company faced a lot of macro and micro economic challenges that affected its operating performances during the research period. The study therefore recommends to government to address those ident fied challenges because of the importance of the industry to the Nigerian economy.

Role of Country-Level Characteristics in Segment Reporting: EU Evidence

Based on a country-level-characteristics framework, we empirically tested the impact of IFRS 8 adoption, the country’s legal system and level of legal enforcement, investor protection, conservatism, and closeness between national GAAP and IFRS on both the quantity and quality of segment reporting. Using a sample of companies from 15 EU countries covering four years (two years preadoption and two years postadoption of IFRS 8), we found that the adoption of IFRS 8 is associated with a decrease in the quantity and an increase in the quality of segment reporting. Moreover, we report that a common-law system, the country-level legal enforcement, and investor protection have a significant and positive impact on the quantity and quality of segment reporting. Meanwhile, country-level conservatism and closeness between national GAAP and IFRS are negatively related to the quantity and quality of segment reporting. In addition to firm-level characteristics, this study extends the prior limited literature by documenting the importance of country-level characteristics as factors that enhance segment reporting practices in Europe. We also discuss the research contributions and implications for research, professional practice, and policymakers.

Accounting constructs and economic consequences of IFRS adoption in India

In this study, we investigate the effects from the adoption of International Financial Reporting Standards based Indian Accounting Standards (Ind-AS) on the quality and comparability of financial reporting by Indian firms. Further, we examine whether these changes in reporting quality and comparability lead to improvement in a firm's valuation, liquidity, and return volatility. We find that the implementation of Ind-AS improves financial comparability. Further, we report that improvements in accounting comparability, rather than reporting quality, had a more significant and relatively greater effect on economic outcomes for Indian firms around the time of Ind-AS adoption.

I, The Impact of Adoption of IFRS 9 on the Value Relevance Accounting Information for the Companies Listed in ISX

This research aims to know the effect of adopting IFRS 9 on the relevance of the value of the accounting information of the companies in the Iraqi Stock Exchange. Researchers relied on analyzing the financial statements of 10 listed companies for years 2016 – 2019. Researchers used the Ohlson price model to test the relationship between accounting information and value relevance. The research indicated that there is a significant relationship between the adoption of IFRS 9 and the relevance of the value of the earnings and the book value, but the earnings information is more relevance than the book value information, it is due to the interest of investors in the income statement in making investment decisions.

The Impact of Applying the IFRSs in Emerging Economies. Case Study on Iraqi Conventional Banks

This research deals with the study of the impact of applying the IFRS in emerging economies, and while referring to the impact of applying the IFRS in Arab countries, the focus is on Iraqi banks, especially conventional banks. The importance of applying the IFRS in emerging economises is that it enables the banks to continue to provide their services to the public, to face future financial problems, and to keep abreast of internal and external developments. It also identifies constraints in order to use the IFRS data which helps Iraqi banks to make their decisions and financial investment plans. The researchers obtained the data for this study through data analytics, which is based on data collected from the annual financial statements of 10 conventional banks. The conclusions of the study contain a set of results that conventional banks are seeking in regards to profitability without being bound by international standards, and also results that the customers are seeking in order to achieve benefits from the banks that apply the international standards (for example, the increase of the security of their deposits). The study concluded that the adoption of IFRS is necessary for banks, since this will help in attracting foreign investments to Iraqi banks.

ANALISIS KOMPARASI MANAJEMEN LABA, PROFITABILITAS, DAN NILAI PERUSAHAAN SEBELUM DAN SESUDAH IMPLEMENTASI PSAK 69

PSAK 69 is the accounting standard resulting from IFRS adoption related to agricultural activities that is effective as of January 1, 2018. This study aims to examine and analyze differences in earnings management, profitability, and value of firm before and after the implementation of PSAK 69. The population of this study is agricultural companies listed on the Indonesia Stock Exchange (IDX) for the 2017-2018 period. The sample selection technique uses a purposive sampling method and the sample that meets the criteria is 17 companies with 34 observational data. The type of data in this study is secondary data. This type of research is quantitative research with a comparative approach. Hypothesis testing in this study using paired sample t-test. The results of this study indicate that there are differences in earnings management before and after the implementation of PSAK 69, while for profitability which is proxied by Return On Assets (ROA) and firm value there is no difference before and after the implementation of PSAK 69.Keywords: earnings management, profitability, PSAK 69, value of firm.

Multi Gender Diversity and Earnings Quality in Islamic Banks: The Moderating Role of IFRS’ Adoption and Culture

Purpose – This paper firstly measure the impact of Board of Directors (BOD); audit committee (AC) and Sharia Supervisory Board (SSB) composition (gender diversity) on earningsquality (EQ) in the Islamic banks (IBs). Secondly, we measure to what extent adoption of IFRS and national culture, which is proxies by Femininity can, moderates the relationship between diversity and EQ. Design/methodology/approach – Hypotheses are tested using pooled OLS-regression models. Our sample comprises 122 IBs across 21 different countries from 2010 to 2017. Our sample include 46 IBs adopter of IFRS and 76 IBs that non-adopter of IFRS as local or Islamic standards. Findings – Evidence reveals that gender diversity in BOD, AC, and SSB is positively associated with EQ activities. Further, adoption IFRS standards by IBs significantly moderate the positive link between board diversity and EQ while shows significantly moderate the negative association between board diversity and EQ for banks that are non-adopter of IFRS. Concerned with the impact of culture; we find that culture dimension of femininity serve as informal institutional forces that influence the association between diversity and EQ. Some results hold and others altered after a number of robustness checks. Originality/value – This study is unique in providing IBs evidence for the moderating effect of accounting standards' adoption and culture on the link between the demographic features of BOD, AC and SSB members and firm outcome. The present study provides a new and far-reaching contribution into the debate about EQ in the context of ethical institutions as IBs as well as contribution into the debate about role of women in board in the context on countries characterized by masculinity community as MENA region or across Muslim countries. Practical implications – The findings have important implications for policymakers, regulators, and investors in their attempts to enhance EQ practices and improve financial reporting quality for IBs.

Analisis Manajemen Laba dengan Adposi IFRS, Ukuran Perusahaan, dan Kepemilikan Blockholder menggunakan modifikasi Model Jones

The aim of this research is to determine the effect of IFRS Adoption, Firm Size, Leverage, and Blockholder Ownership on Earnings Management. The research was conducted on manufacturing companies listed on the Indonesia Stock Exchange (BEI) period of 2012-2015. Sample of this research consist of 64 companies using the purposive sampling method. Earnings Management is proxied with discretionary accruals and measured using a modified jones model. IFRS Adoption measured by Dummy Variables. Firm Size is measured by logarithm base ten. Leverage measured by Debt to Total Asset Ratio (DTA) and Blockholder Ownership measured by Dummy Variables. The results in this study showed that there was a positive and insignificant influence between the adoption of IFRS on earnings management, firm size variable had a negative and insignificant effect on earnings management, leverage variable had a positive and significant effect on earnings management and blockholder ownership had a negative and insignificant effect on earnings management. This research is expected to provide input to users of financial statements as decision-makers and to parties with an interest in financial reports regarding the importance of quality financial report information, especially information regarding earnings management

The Clevo case: A timeline of IFRS “Reluctance”

AbstractThere is an ongoing policy debate over whether the adoption of IFRS should be mandatory. All Taiwanese listed companies had to adopt IFRS from 2013, but they could choose to adopt earlier in 2012. Surprisingly, given cross‐national comparisons, not one Taiwanese company adopted early. This is an extreme example of policy “reluctance.” We explore this unique setting, by analyzing a leading reluctant Taiwanese company, Clevo. It was widely known as a potential early adopter but withdrew at the last minute. This paper illustrates how a firm which perceived net benefits would be incentivized to adopt IFRS early, but then how uncertainties in regulations could stall such intentions. Through discussing how the accounting regulators responded to this firm's actions (and vice versa), this paper helps us to understand better the prerequisites for effective policy design and corporate decision‐making in the context of IFRS adoption and implementation. This paper, using a qualitative research method, will also add to exiting IFRS literature which mainly focuses on quantitative analysis.

Relation and Dynamics between Derivative Usage and Earnings Smoothing: Evidence from China

Using a sample of listed non-financial firms in China from 2009 to 2019, we show that financial derivatives usage increases the firms’ (discretionary) accruals earnings smoothing (artificial or intentional smoothing). We find that state ownership, overseas operations, and public scrutiny play the moderating roles between derivatives usage and earnings smoothing. Moreover, these three moderating factors have unambiguous interactions inter se: the mitigation effects of public scrutiny would be stronger for the firms owned by the state or the firms with overseas operations; and the private firms without overseas operations are the “worst-hit areas” of the earnings smoothing. In addition, our results imply that the futures might be the only type of derivatives that are used to smooth earnings. This paper also finds that the adoption of IFRS 7 and 13 in 2014 failed to mitigate the derivatives smoothing. Overall, our paper reveals the relation of derivatives usage to intentional earnings smoothing in China, which is partially contrary to the evidence in the U.S., and the detailed dynamics of the relation.

Big Town Hydro: An Accounting Choice Case*

ABSTRACTThis fictional case is based on the real‐world events when a Canadian public electric utility company adopted IFRS. Many of these firms previously used US GAAP. In this context, the case gives students the opportunity to research key differences between IFRS and US GAAP relevant to utility industries, discuss the impact of IFRS standards on a firm's performance, and make recommendations on important business decisions. Specifically, this case exposes students to (i) the rate‐regulated electric utility industry and complex regulatory deferral accounts; (ii) the impact of IFRS adoption on key financial ratios and bond issuance decisions; and (iii) a what‐if analysis in making business decisions under the new IFRS 16 standard. This case is suitable for use in undergraduate or graduate intermediate level financial accounting courses. It can also be explored in an advanced level or public sector accounting class.

IFRS adoption and stock misvaluation: Implication to Korea discount

Analyzing publicly traded stocks in Korea surrounding IFRS adoption in 2011, we find that the gap between stock price and firm value, value-to-price (V/P) ratio, narrows following the IFRS adoption and that this narrowed gap is observed only for higher V/P firms. We further find that the return predictability of V/P decreases in the post-IFRS period. Using a path analysis, we report further evidence that mandatory IFRS adoption decreases idiosyncratic volatility and improves trading volume and market liquidity, thereby contributing to the narrowed gap between value and price. We conclude that IFRS adoption contributes to resolution of Korea discount.

IFRS Adoption and Reporting Quality: An Assessment of User’s Perception in Nigeria

The study assessed the perception of financial statement users on the extent of reporting quality following IFRS adoption in Nigeria. A comparative approach was utilized, where users’ (investors)opinions on reporting quality between the Statement of Accounting Standards (SAS) regime and the International Financial Reporting Standards regime were sought and compared. The results obtained from the structured Likert scale questionnaires were analyzed using the T-Test. It was found that all the qualitative characteristics of financial reporting which were used as reporting quality variables in the study have improved with the adoption of IFRS except for the extent of the ability of financial reports to confirm or correct prior user’s expectation which was discovered to be better during SAS regime. It was recommended that the Financial Reporting Council of Nigeria (FRCN) should embark on advocacy aimed at educating investors’ especially, institutional on the issue of prediction and assessment of IFRS-based financial statements.

Fair value measurement and its impact on audit fees: evidence in the Brazilian market

Objective: The purpose is to verify the impact of using the measurement at fair value on the audit fees, differentiating even the period before and after the adoption of IFRS 13 (CPC 46).
 Methodology: The research is quantitative, for testing the hypothesis raised, the multiple regression technique was used, with data available from companies listed in B3 for the period between 2010 and 2016.
 Results: The evidence indicates that the complexity and subjectivity of fair value is recognized by the audit firms, that is, audit firms recognize that fair value measurement implies more effort and that the associated audit risk rises, leading firms to charge of a risk premium for the provision of the service. However, it was not possible to confirm that auditors' fees increased after the adoption of IFRS13 (CPC 46).
 Contributions of study: Theoretical/methodological - The study contributes to understanding the impacts of adopting international accounting standards, in this specific case on audit fees. Social/management - Given the evidence that there is a higher audit cost associated with the greater complexity of information in a fair value environment, companies can develop mechanisms to minimize the uncertainty of the information to be audited.

Foreign Direct Investment in GCC Countries: The Essential Influence of Governance and the Adoption of IFRS

This paper presents an analysis of the factors affecting foreign direct investments, focusing on governance quality and adoption of International Financial Reporting Standards on countries of the Gulf Cooperation Council, which are a special case of study due to their idiosyncratic characteristics, rich natural resources and geographical position. Panel data analysis was conducted, implementing three different models (Fixed Effect, Random Effect, and Arellano Bond Dynamic Model). The results show that the adoption of International Financial Reporting Standards is a strong determinant that promotes foreign direct investments. As regards the governance quality, the block of Gulf Cooperation Council countries has fulfilled the minimum level of governance pre-conditions relative to foreign direct investments. In addition, governance indicators associated with law, rules, and corruption are more influential determinants for foreign direct investments.

Do Converged to IFRS National Standards and Corporate Governance Attributes Affect Accounting Conservatism? Evidence from China

The purpose of this paper is to examine the effect of the adoption of converged to IFRS national standards on accounting conservatism (AC) and to investigate the effect of corporate governance (CG) attributes (government ownership, management ownership, concentration of ownership, board size, board independence, CEO duality) on АС in China. The large sample of A-share Chinese listed companies, comprising 26,004 firm-year observations form 2925 companies spanning from 2003 to 2019 collected from CSMAR database and analysed using multivariate regression techniques. The study provides empirical evidence testifying to the decrease in AC level after converged to IFRS national standards in China became mandatory. The findings indicate that government ownership, management ownership, concentration of ownership and CEO duality are all negatively associated with AC. By contrast, board size, board independence, has no significant relationship with AC in Chinese institutional settings. Whereas prior studies investigate the IFRS adoption per se, our study examines how national standards converged to IFRS affect AC indicating that converged national standards produce the analogous effect expected from adoption of the genuine IFRS. Moreover, it means that accounting conservatism is inherent also in the standards as opposed to the conceptual framework. Next, our study is also instrumental in identifying the relationship between AC and CG attributes in an underexplored jurisdiction with a significant impact on the world economy - China. These findings can be utilized and be heeded to by managers in the design of companies’ supreme governing body, as well as regulators while proposing legislation/regulations concerning the composition of the board of directors. The results subject to the limitation for a limited range of CG variables and measurement of accounting conservatism applied. Next, the endogeneity problem is not solved as yet, therefore which direction the causality runs from CG to AC or from AC to CG is disputable.

Revisiting International Public Sector Accounting Standards Adoption in Developing Countries

ABSTRACT Based on a comprehensive review of recent studies on IPSAS adoption around the globe, we develop in this article a conceptual model to examine alternative predictors of adoption for developing countries. Drawing from this framework, we develop a rigorous econometric modelling on the impact of legal, political and accounting environments in the developing countries’ drive for IPSAS adoption. Contrary to what existing literature projects, our study reveals that a country’s IFRS and ISA experience is more important and significant drivers of IPSAS adoption compared to IFRS adoption. Likewise, political system, regulatory enforcement, lenders and borrowers’ rights and the level of corruption in a country also influence IPSAS adoption.

Liquidity and IFRS Adoption in Canada

ABSTRACT We examine cross-sectional differences in changes in liquidity for Canadian firms between pre-IFRS and post-IFRS adoption based on their pre-IFRS disclosure quality. In a matched-sample analysis, with U.S. firms acting as control firms, we find that liquidity improved after mandatory IFRS adoption for Canadian companies with high pre-IFRS disclosure quality, but declined for Canadian companies with low pre-IFRS disclosure quality, in comparison to U.S. peers. We find similar results when we stratify the sample based on total assets—larger Canadian firms gained liquidity, while smaller Canadian firms lost liquidity, relative to the U.S. control firms. Our results are sustained when we use firms listed in Canada that report under U.S. GAAP before and after IFRS adoption as control firms.

Does Mandatory IFRS Adoption Affect Audit Hours and the Effectiveness to Constrain Earnings Management? Evidence from Italy

SUMMARYWe examine the effect IFRS adoption has had on audit effort and the effectiveness of greater audit effort on constraining earnings management. We find that following Italy's adoption of IFRS, audit hours (but not the hourly rate) increased, suggesting that audit effort (in audit hours) increased following IFRS adoption. We then examine whether more audit hours are associated with improved audit quality in the IFRS regime. Consistent with prior literature (Caramanis and Lennox 2008), we find that more audit effort is associated with lower abnormal accruals in the period before IFRS adoption. Interestingly, after Italy adopted IFRS, abnormal accruals are lower, but audit hours were less associated with lower abnormal accruals, implying that more audit hours are needed to constrain earnings management. Collectively, our empirical analysis suggests that while audit effort increased with mandatory IFRS adoption, the effectiveness of audit effort to constrain earnings management decreased.

Start-up Firms and Discretion Over Deferment of Disclosure: An ex Ante and an ex Post Perspective

We examine deferment in the reporting of financial statements using an alternative measure of reporting delay based on start-up firms’ discretion over the length of the first reporting period. We explore discretion, exercised both by local GAAP adopters and by IFRS adopters, for a sample of Greek start-up firms using both an ex-ante and an ex-post research design. In addition to various factors previously considered by the accounting literature (i.e. performance, leverage, voluntary auditing, and the GAAP regime), we find that liquidity constraints, shareholders’ pressure, and increased noise in accounting measures are associated with a start-up firm’s reporting choice over the length of the first reporting period.