IFRS Standards Research Articles

Effect of IFRS Convergence on Real Earnings Management in Nigerian Manufacturing Firms.

This research endeavors to present empirical insights into the influence of IFRS convergence on real earnings management (REM) within Nigerian Manufacturing Firms. The study utilizes data sourced from the Nigerian Exchange Group (NGx), with a sample size consisting of 5 manufacturing firms. Secondary data is employed for analysis. Financial statements spanning from 2014 to 2023 were utilized to conduct descriptive statistical analyses pertaining to the pre-convergence stage of IFRS. The study employed ex-post facto research design. The methodology incorporates descriptive, correlation, and regression analyses. This impact is observed through the abnormal operation cash flow proxy, both before and after the convergence of IFRS, with firm size serving as a control variable. The findings of this investigation suggest a positive impact of IFRS convergence on REM and firm size within the selected manufacturing firms in Nigeria. The study thus concluded that IFRS convergence on has a huge significant impact on real earnings management (REM) of Nigerian Manufacturing Firms. The study recommended amongst other that there is a pressing need for enhanced monitoring and enforcement mechanisms to ensure compliance with IFRS standards and prevent any potential resurgence of earnings management practices

ESG concepts in business practice Characteristics and assessment of common ESG frameworks

In today’s business environment, incorporating Environmental, Social, and Governance (ESG) principles into corporate strategies has evolved from being a marginal consideration to a core element of strategic planning. In the study, we characterize and assess ten widely recognized ESG frameworks. The selection of these frameworks is grounded in a literature review, complemented by an analysis of professional websites and forums that offer rankings of prevalent frameworks. Additionally, our own expertise in the field is used in this selection process. Our evaluation of ten key ESG frameworks reveals a spectrum of approaches to sustainability and responsibility. GRI and PRI are noted for their global scope, while SASB provides industry-specific insights but with limited scope. CDP and TCFD excel in environmental and climate aspects, respectively. IFRS Standards are developing a global reach, and IIRC focuses on integrating sustainability with financial reporting. PRI and UNGC are based on voluntary commitment, offering broad frameworks. CDSB and IIRC, while focused, encounter implementation challenges. IFC Performance Standards are comprehensive in project finance. Each framework, with its unique strengths and challenges, varies in global recognition, applicability, and stakeholder relevance, contributing differently to sustainable practices. Key words: environmental, social, and governance (ESG); ESG frameworks; ESG standards; sustainability reporting; business strategy

Managing the promotion of products and stocks of enterprises in the context of digitalization of economy: cost aspect

The goal is to consider the problems of modern enterprise management, including in agricultural sector. Methods – normative, classification and process approaches. Results – an interpretation of the concept of “finished products” and its definition in the law on accounting, IFRS standards, tax reporting, economic theory, various standards and classifiers are given. Emphasis is placed on systematization and management of this process in the movement of finished products. The issues of movement of manufactured goods in the form of stocks on the territory of the facility, their classification and tasks of formation in production process in relation to agroindustrial complex are revealed. Attention is also paid to such a stage as inventory. The specifics of accounting in crop production industry and maintaining the optimal size of reserves, as well as providing financing, in particular in agricultural enterprises from the perspective of legislative and regulatory documents, are shown. The supply chain is presented depending on supply and demand. Key points are noted that determine the need for a transition to digital technologies and intelligent systems in agricultural production. The authors state that for effective financial and economic activity of an economic entity, the integration of direct costing for manufactured and sold products, items, control, planning and analysis is required. Conclusions – in the process of study it is determined that the main direction in a wide range of problems is to minimize various types of costs associated with the acquisition and storage of reserved product resources, use new forecasting methods, increase the level of personnel qualifications, as well as their interest. It is necessary to introduce monitoring of the productive accumulation fund, regular audits, assessment of the cost of its maintenance, and the establishment of partnerships. Inventories are a significant component of working capital, which is due to its role in ensuring the continuity of production and marketing activities of an economic structure and the significant impact of its volume on the effectiveness of the use of capital.

Qualitative Characteristics of Accounting Information (Declared with IFRS Standards) and Financial Performance : Statistical Study and Correlation Test

In an international context characterized by the dismantling of economic barriers, the globalization of monetary operations and the fluidity of financial movements, the application of IFRS standards is no longer a luxury, but rather an increasingly persistent necessity for Moroccan and international companies. In this context, and using a statistical analysis on SPSS, this research aims to assess the correlation between the quality of accounting information (declared in accordance with IFRS standards) and the financial performance (in short term and in medium and long term) of Moroccan companies. This quantitative research which uses a Likert-type questionnaire scored from 1 to 5, and through the responses collected from a sample of 314 individuals (composed of accountants, chartered accountants, professors, trainers, doctors and doctoral students), target to demonstrate and verify, statistically, the relationship of correlation and interdependence that connects between « the qualitative characteristics of accounting information » and « the financial performance ». The results confirmed a negative correlation « in the short term » between the aforementioned variables and a positive correlation relationship between the same variables « in the medium and short term ». In the medium and long term, the positive correlation between « the qualitative characteristics of the accounting information declared according to IFRS » and « the financial performance », will probably be a factor that encourages companies to practice international accounting standards despite the costs incurred to ensure this passage.

IFRS Adoption Approaches and Accounting Quality

SynopsisThe research problemThis paper sought to ascertain whether IFRS adoption approaches impact accounting quality. Specifically, as some countries utilize IFRS without modifications while others modify IFRS to suit their local context, we aimed to test whether these differences in IFRS adoption approaches have implications for accounting quality.MotivationPrior studies focused on the impact of IFRS adoption on accounting quality without considering the different approaches used by the adopting jurisdictions. Such differences affect the version of IFRS utilized at the country level. We refer to jurisdictions as adopters of IFRS when the IASB’s version of IFRS is utilized without modifications. In contrast, jurisdictions where the IFRS standards are modified at the national or regional level are called adapters. We also recognize the role of enforcement; thus, we first examined whether IFRS adoption and enforcement influence accounting quality. Second, we compared the accounting quality for adopters and adapters of the standards.The test hypothesesOur first hypothesis is that the quality of enforcement has a stronger effect on accounting quality than the adoption of IFRS. Second, adapters will have higher accounting quality than adopters of IFRS.Target populationWe focused on the reporting of companies in African countries. These jurisdictions have not been sufficiently examined in prior studies.Adopted methodologyWe use panel data estimation, specifically, random-effects model.AnalysesWe examined accounting quality for pre- and post-IFRS reporting based on 3946 firm-year observations from six African countries over 18 years. Our analysis of the adoption approach is based on 3736 firm-year observations for companies utilizing IFRS. Except for Egypt, which used a modified version of IFRS, other countries in our sample utilized the IASB’s version of IFRS. Using various standard metrics for accounting quality (earnings management, timely loss recognition, and value relevance), we ascertained whether adaption is associated with higher accounting quality compared to adoption.FindingsThe results indicate that IFRS adoption and enforcement proxy are not associated with accounting quality, but other institutional factors are. Adoption of the standards is less important for accounting quality than the existing institutions. With regard to the adoption approach used, adopters demonstrated higher accounting quality for accounting-based measures, less income smoothing, and more timely loss recognition than the adapters. The adopters also exhibited greater value relevance, which suggests that their reporting was better able to capture information that affects firm value. The adoption approaches may influence different dimensions of accounting quality, and the resulting differences are important for users, companies, and standard setters to consider.

EMPIRICAL STUDY: THE ASSESSMENT OF FINANCIAL STATEMENTS IN INDONESIA ISLAMIC BANK BASED ON IFRS AND AAOIFI STANDARD

Abstract: This study aims to measure how far Indonesian Islamic banking adopts AAOIFI and IFRS standards in its financial reporting. This study uses the annual report of Indonesian Islamic banks in the period 2014-2018 obtained from 5 Islamic banks in Indonesia compiled from the official website of the five banks that were sampled. This research uses a quantitative approach by using a Content Analysis method. This study's results indicate that Indonesian Islamic banking is more inclined to adopt IFRS standards in its annual financial reports (annual report). It can be proven by the large number of percentages of Islamic banking that predominantly meet the total items selected as IFRS standards in its financial statements, compared to the percentage Islamic banking that matches the total items selected as AAOIFI standards.
 
 Keywords: financial statements; Islamic banks; IFRS; AAOIFI

True and fair view/fair presentation as a nexus between conventional accounting, sustainability accounting and Islamic accounting: unifying three frameworks?

The objective of the article is twofold. Firstly, it evaluates the importance and significance of true and fair view (TFV)/fair presentation (FP) in European jurisdictions using IFRS standards. Secondly, it examines the potential role of TFV/FP for sustainability accounting and for aligning with the moral code of Islamic accounting. We assess whether we are at an important juncture in time where a common understanding of TFV/FP and the TFO could pave the way for increased understanding and harmonisation across all three frameworks. Conventional accounting is examined in the context of TFV/FP. A survey shows significant acceptance of TFV in European jurisdictions using IFRS, but gaps exist, and reclarification of the concepts could be timely. Experts’ opinions on TFV in ‘conventional accounting’ can illuminate sustainability accounting, which could benefit from the application of these concepts. The introduction of sustainability accounting in IFRS is an opportunity to develop a unified understanding of the TFV/FP concepts across all three frameworks and conclude in stronger and connected base frameworks. This is the first time that sustainability accounting development is considered as an opportunity to strengthen and unify the frameworks of conventional, Islamic and sustainability accounting through the common acceptance of principles-based concepts TFV/FP.

Theoretical Approach to the Application of Environmental Financial Accounting

The awareness evolution of company’s economic players about the environmental issues, leads to changes in the companies and their stakeholder’s real behavior, this brings to adopt different actions protective of the environment. However, this new perspective has challenged the organizational model, the management system and the organization’s competition strategic vision. Otherwise, the implementation of these actions in the sustainable development context generates significant expenses which must be accounted for governance purposes. Nevertheless, the traditional accounting has proved incapable to register flows related to depollution and pollution prevention actions The intervention of accounting standard-setters is therefore required, such as IAS / IFRS standards. This has proved an ability to promote financial environmental accounting by determining concepts besides a modern vison of accounting information use, in order to help companies assess their environmental performance and inform investors about potential environmental risk.

The concept of quality of financial accounting information and the relationship with IFRS standards: analysis of the situation of companies listed on BVB

Abstract In the accounting profession the quality of information is a very important aspect. The concept of information quality covers three stages: the representation of reality and quality, the formation of meaning and the transmission of information. The purpose of this paper is to analyze the relationship between the quality of financial- accounting information and the relationship between the introduction of IFRS in the modernization of the national and international economy. Based on an extensive literature review, we find that implementing IFRS has yielded favorable results in terms of increasing the transparency and relevance of the value of financial information. The research follows general and specific approaches regarding the increase of the quality of financial – accounting information. Development through entrepreneurial education and innovative doctoral and postdoctoral research, project code POCU/380/6/13/125031, Project co-financed from the European Social Fund through the Operational Program Human Capital 2014-2020.

Cross‐country diversity and non‐IFRS financial performance measures

AbstractWe investigate the disclosure of non‐IFRS performance measures by 400 companies from eight countries using IFRS Standards (Australia, France, Germany, Hong Kong, Italy, Singapore, Sweden and the United Kingdom) in the years 2005, 2008, 2011 and 2013 (1595 company‐years). The incidence of disclosure is higher in UK and France but lower in Hong Kong, Germany and Singapore. Exclusions relating to impairment, tax, and mergers and acquisitions are frequent. Firms making non‐IFRS disclosures are more likely to be larger, have higher leverage, and exhibit greater volatility in their reported income. Additional tests show national reporting traditions and practices affect non‐IFRS disclosures.

ORGANIZATION OF ACCOUNTING BY-METALLURGICAL PRODUCTS

In the work according to the reliable financial statements of PJSC "Dnipro Metallurgical Plant" a study of the peculiarities of the organization of accounting for the production of by-products of metallurgical products and considered the principles of formation of production costs in the system of accounts. The characteristic of organizational and administrative structure of the metallurgical enterprise is given; the type of activity and assortment of production output are estimated. The basic principles, elements of the accounting policy of the enterprise are studied and the order "About the organization of the account of the metallurgical enterprise" in the part of accounting display of finished metallurgical production is characterized. It is noted that the organization of accounting at a large metallurgical enterprise is formed using an obsolete system of registers - journals-orders, which were introduced into the accounting system in the last century. This approach to the organization of accounting is not a violation of applicable law, but too time-consuming, some transactions in different journals are duplicated, and their paperwork requires additional costs. Regulations on the accounting policy of the plant were approved in accordance with the NP (S) BU and taking into account the provisions of international financial reporting standards IFRS. In the course of the research it was concluded that the accounting of by-products of blast furnace production is carried out simultaneously with the production of basic metallurgical products. Having formed the logs of accounting entries,it is established that by-products are accounted for from production as finished, and then sent to bring to a certain condition back into production. This approach to accounting is irrational and can not adequately reflect the production process. Therefore, the accounting algorithm of improvement of correspondence of the account of by-products is offered in work and accounting records of formation of reliable cost of by-products (slag) are developed.

The effect of general external environmental variables on the characteristic of Faithful Representation and its reflection on the presentation in financial reports according to the requirements of IAS1 at the Gulf Commercial Bank

The current study is based on identifying the concept of general external environmental variables and their impact on the activities and work of economic units through the components of the characteristic of Faithful Representation and its reflection on the requirements of the International Accounting Standard IAS1 “for presentation in financial statements”, where the study aimed to identify the impact of external environmental variables and conditions. General in the components of the characteristic of Faithful Representation and its reflection on the requirements of the accounting standard IAS1, and the research concluded that the annual financial reports have been modified in line with the presentation according to the International Financial Reporting Standards IFRS as of the year 2016. The current research recommended that the Gulf Bank management should adhere to the timings Specific for reporting annual reports, because a breach of this would reduce the importance of accounting information presented in financial reports and thus reduce the Faithful Representation of accounting information in accordance with IAS1 requirements.

Approaches to Building Default Probability Models for Financial Instruments of Project Financing at Long Time Horizons


 Project financing is one of the priority tools for stimulating the country's economic growth around the world, which allows the implementation of large-scale and capital-intensive projects, providing favorable credit conditions with insufficient creditworthiness of the project beneficiaries [1].
 As a rule, project financing instruments are long-term (10-30 years, depending on the type of transaction), so this asset class is interesting for the implementation of the task of building long-term models for assessing credit risk associated with the introduction in 2018 of the new international financial reporting standard IFRS 9 "Financial Instruments".
 The new standard requires financial institutions to calculate their expected credit loss (ECL) at the time of granting loans and other banking products exposed to credit risk [2], taking into account different time horizons, which significantly changes the traditional approaches to assessing credit risk by commercial banks [3], [4].
 As part of this work, a model was built to assess the long-term probability of default for the portfolio of assets of a Russian commercial bank belonging to the project finance segment in accordance with the requirements of the International Financial Reporting standard IFRS 9 "Financial Instruments". At present, the topic of this work is extremely relevant and may be of interest both for commercial banks that are faced with the problem of improving credit risk assessment models

Business Combinations under Common Control: Filling a Gap in IFRS Standards

AbstractThe aim of this paper is to explain the International Accounting Standards Board's (IASB) preliminary views for accounting for business combinations under common control, an issue not currently addressed in International Financial Reporting Standards. Such combinations are widespread and the accounting for them is diverse. The IASB's preliminary views aim to reduce diversity in practice and to improve the information provided to investors so they can understand the effects of these transactions and compare companies that undertake them.Accounting for business combinations under common control is not currently addressed in International Financial Reporting Standards. The author describes some of the International Accounting Standard Board's proposals to reduce diversity and improve investors’ information in this area.

COMPARING THE VALUE RELEVANCE OF SELECTED ACCOUNTING INFORMATION IN CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS: THE CASE OF NIGERIAN LISTED FINANCIAL SERVICE FIRMS

In a company with a group structure, financial information is presented in two folds via consolidated and separate financial statements. The reporting of the similarly classified elements of financial statements arranged side by side in two columns carrying two different figures may be puzzling. Consequently, investors and other financial information users having two different figures available to them need to be guided as to which set(s) of information they need to make predictions and decisions. This study provides evidence about the comparative value relevance of accounting information for consolidated and separate financial statement of listed financial service firms in Nigeria. The study population is the entire listed financial services firms throughout the period of 2014-2018. Accounting information was represented by earnings per share, book value per share, dividend per share, and cash flow per share. These proxies were regressed against the market price per share. Data for accounting information were sourced from the annual reports of sampled firms and market prices from the Nigerian stock exchange factbook. A census sampling was used after a three-point filter was applied to the original population. The results show generally that both consolidated and separate accounting information is value relevant. However, consolidated accounting information is found to be more value relevant than separate accounting information. The study thus recommends the strengthening of firms’ operations, re-evaluation of the dividend policy, and enhanced implementation of IFRS standards to enhance value relevant accounting information that will be useful to the shareholders in making informed decision and taking adequate actions.

Bridge over troubled water: Is it possible to define other comprehensive income?

Although other comprehensive income did not exist in the conceptual framework until 2018, it has been a part of IFRS for many years, and it has not been defined based on accounting theory. This paper considers arguments for the current use of other comprehensive income under IFRS and finds that matching and prudence are at the core of other comprehensive income in IFRS despite not being elements of the conceptual framework. This suggests that the concept of other comprehensive income exists because the IFRS standards are founded on a mix of balance sheet-based and income statement-based accounting principles. Based on the characteristics of other comprehensive income and the IASB's arguments for the recognition of gains and losses in other comprehensive income, this paper proposes a definition of other comprehensive income that can be used to ensure a uniform application of the concept across accounting standards and to reduce risks of inconsistency.

ОСОБЕННОСТИ ОРГАНИЗАЦИИ БУХГАЛТЕРСКОГО УЧЁТА В БЮДЖЕТНЫХ УЧРЕЖДЕНИЯХ

This article reveals the peculiarities of accounting in budgetary organizations. The organization of accounting in budgetary organizations has a number of features that are based on the legislation on the budgetary structure, instructions on budgetary accounting, other regulatory documents on accounting and reporting in budgetary organizations, as well as their industry specifics. It also reflects the relationship of domestic accounting of budgetary organizations with IFRS standards

Credit Scoring – General Approach in the IFRS 9 Context

With the coming into force of the standard IFRS 9 – Financial Instruments, in January 2018, financial institutions passed from an incurred loss model to a forward-looking model for the computation of impairment losses. As such, the IFRS 9 models use point-in-time, estimates of Probability of Default and Loss Given Default and provide a more faithful representation of the credit risk at a given as they are based on past experiences as well as the most recent and forecasted economic conditions. However, given the short-term fluctuations in the macroeconomic conditions, the final outcome of the Expected credit loss models is highly volatile due to their sensitivity to the business cycle. With regard to Probability of Default estimation under IFRS 9, the most commonly methods are: Markov Chains, Survival Analysis and single-factor models (Vasicek and Z-Shift). The development of the score-cards is still the same as in the case of the Internal Ratings Based Probability of Default models, encouraging institutions to use the already available credit rating systems and perform adjustment to the calibration. This paper outlines a non-exhaustive list of quantitative validation tests would satisfy the requirements of the IFRS 9 standard.

Comparison of Financial Reporting in the Visegrad Four Countries in a Global Environment

Research background: The Visegrad Four (V4) countries are the Czech Republic, Slovakia, Hungary and Poland. As members of EU they had to incorporate into their national legal accounting framework the European Directives related to annual accounts, valid at the time, where various choices were possible to adopt. Some principles of the international financial reporting standards IFRS also affected the national accounting frameworks more or less, depending on the country. These various influences may affect the external user´s ability to read the published financial statements and compare them. Purpose of the article: The aim of this paper is to compare the relevant national legal framework of accounting in selected areas and the content of financial statements required in the V4 countries and to point out the influence of the chosen presentation of some financial information on selected indicators of financial analysis. Methods: Methods of description, analysis, comparison and synthesis are used to achieve the set aims of the paper. The financial analysis is demonstrated on an illustrative example of reported financial information which is based on the different national accounting legislation. Findings & Value added: The comparison showed some similarities and differences. The main differences amongst the V4 countries are related to the reporting of leased assets and the variation of own production and work-in-progress. Czech Republic does not report the leased assets in the balance sheet of the user of the asset but in the owner´s while the Slovak republic, Hungary and Poland report the asset in the user´s balance sheet which is in accordance with the international accounting standards IFRS (in case of Poland it depends on the lease contract). The Czech Republic reports the changes in own production and capitalization of own work as part of expenses which is in line with IFRS. The Slovak Republic, Hungary and Poland report these items as part of revenues which is in line with the EU Directive but in contrast with IFRS. Also, the Slovak republic and Poland have definitions of the elements of financial statements in their accounting legislation while the Czech Republic and Hungary do not have these definitions. These differences influence the results of ROA, ROE and cost efficiency when comparing the same situation in these countries as it is evidenced on the illustrative example in the paper.

The Impact of IFRS Adoption on the Quality of Accounting Information: Systematic Literature Review

The quality of accounting information cannot be separated from the adopted accounting standards. More than 87% of countries worldwide have implemented IFRS standards as financial guidelines in their countries. The goal of IFRS is to make companies more transparent and flexible in producing accounting information based on which users can predict future investment values. The purpose of this article is a systematic literature review on the quality of accounting information associated with adopting IFRS. The sample of this study - 125 articles reviewed in four main classifications: research subject areas, measurement of accounting information quality, theoretical approaches, and research methods. Previous research was obtained from online databases such as Science Direct, Emerald Group, Sage Journal, and Taylor & Francis. The PICO framework in this study was applied to minimize bias from previous studies. The analysis results show that average the most articles on the quality of accounting information were found in journals categorized in the accounting field. Most studies have been found on the European continent regarding the quality of accounting information – 52 (37.7%). Determining the quality of accounting information requires several tests. As a result, 49 (38.8%) and 47 (37.1%) articles emphasize the accrual test model and value relevance model in assessing the quality of accounting information. The results show that 56 articles (44.8%) use the regression analysis method to test value relevance, accrual, and timely loss reporting models.