Impact Of International Financial Reporting Standards Research Articles

ВИКОРИСТАННЯ МСФЗ СУБ’ЄКТАМИ МАЛОГО БІЗНЕСУ: ОСОБЛИВОСТІ ВПРОВАДЖЕННЯ ТА ПРОБЛЕМНІ АСПЕКТИ

The article is devoted to the study of the use of IFRS by small business entities in Ukraine. Implementation of international financial reporting standards (IFRS) is a significant step on the way to harmonizing the domestic accounting system with international standards. This process should contribute to the improvement of the quality of financial reporting of enterprises, transparency of their activities and competitiveness on the world market. IFRS are global financial reporting standards designed to ensure comparability of financial reporting of enterprises in different countries. In the course of the work, the impact of IFRS on small business, the peculiarities of implementation of IFRS by small business entities were analyzed. The advantages and disadvantages of IFRS implementation by small business entities are determined. The advantages were attributed to: improving the quality of financial reporting, increasing the transparency and comparability of financial information, facilitating the company's entry into international markets, establishing partnerships with foreign companies, attracting foreign investments and obtaining external loans. Among the disadvantages are the costs of implementing IFRS and increasing the complexity of accounting. It was established that the use of IFRS by small business entities is an important factor in increasing their financial stability and competitiveness. It has been proven that the implementation of IFRS by small business entities in Ukraine is accompanied by certain problems that are directly related to the specifics of the application of IFRS, as well as to other, both internal and external, challenges faced by enterprises at the moment, the main of which are: lack of awareness and qualification of accountants, financial difficulties, peculiarities of taxation. The directions for optimizing the implementation of IFRS by small business entities are presented, the problems that may arise in this case are identified, and the directions for their solution are proposed. Conclusions are drawn, directions for further research are suggested.

Impact of Voluntary IFRS Adoption on Accounting Figures: Evidence from Japan

Abstract Using a sample of Japanese firms, we investigate the impact of the voluntary adoption of International Financial Reporting Standards (IFRS) on accounting figures. To control institutional factors, we manually collected two sets of accounting figures prepared by the same firm and for the same fiscal year from reconciliation statements required by IFRS 1. We find that net income is significantly higher under IFRS than under Japanese generally accepted accounting principles (J-GAAP), while equity is not significantly affected by the adoption of IFRS. We also find that the implementations of some accounting standards (e.g., accounting standards for goodwill, intangible assets, and employee benefits) significantly impact both equity and net income. We further find that voluntary IFRS adopters show a higher goodwill ratio (goodwill/total assets) than J-GAAP adopters and that this goodwill ratio positively correlates with the impact of IFRS 3 (Business Combinations) on equity. These results indicate that, despite the global demand for convergence of local GAAP with IFRS, the differences in fundamental concepts between IFRS and local GAAP still remain.

IFRS, financial development and income inequality: An empirical study using mediation analysis

Income inequality continues to be an issue of concern. Early work on economic development suggested that, as a country’s economy grows, incomes would rise and reduce any income disparities. However, there is growing evidence that as countries develop, income inequality actually worsens. Some studies argue that this is the result of financial development and the growth of the financial sector. Although there is a good deal of empirical research on the relationship between financial development and income inequality, there is no prior work that examines how accounting standards, in particular International Financial Reporting Standards (IFRS), might influence this relationship. This study examines the relationship of IFRS and financial development with income inequality using mediation analysis over the period from 1998 to 2018. The results indicate that the impact of IFRS on income inequality is mediated by financial development. Moreover, there is a direct relationship between IFRS and inequality.

Fair Value Accounting for Property, Plant, and Equipment: Impact of IFRS 1 Adoption

ABSTRACT This paper uses a unique setting of Canadian public firms adopting International Financial Reporting Standards (IFRS) to investigate the factors that motivate companies to revalue Property, Plant, and Equipment (PP&E) under the deemed cost provision in IFRS 1, and whether revaluations help predict future performance, and what is the market reaction to such revaluations. Utilizing the probit model, difference-in-differences approach, and Wald test, we find that large firms and/or firms with higher net PP&E to total assets ratios are more likely to revalue PP&E, and firms adopting the fair value option for PP&E record lower depreciation in the post-IFRS period. In addition, we show that investors react negatively to the firms electing the fair value option for PP&E and the market discounts such revaluation information.

The combined impact of IFRS mandatory adoption and institutional quality on the IPO companies’ underpricing

PurposeThis study aims to examine the impact of the International Financial Reporting Standards (IFRS) mandate and differences in national institutional quality on the underpricing of Initial Public Offering (IPO) companies.Design/methodology/approachMultiple Difference-in-Differences (DiD) ordinary least squares estimations were conducted for 100 corporations listed on the Saudi Arabian stock market using country-level institutional quality data from 2005 to 2017.FindingsIFRS requirements and improvements in institutional quality have a combined effect on minimizing IPO underpricing. The analysis of the combined impact of IFRS requirements and differences in transparency revealed that IPO vendors leave $5 on average for IPO investors to cash out post the IFRS mandate, compared to $29 previously. Thus, IFRS serves as a quality certification instrument that alleviates IPO investors’ ex ante uncertainties, even in nations with undeveloped institutions.Practical implicationsThe findings may be beneficial to researchers and policymakers. The results suggest that institutional quality enhancements and obligatory IFRS implementation highlight IFRS’s synergistic influence on the IPO market. While European harmonization efforts drove the adoption of IFRS in Europe in 2005, Saudi Arabia’s adoption of IFRS is not being driven by such initiatives (Daskeet al., 2008; Persakis and Iatridis 2017). In reality, when IFRS was officially imposed in Saudi Arabia in 2008, it, like many other emerging market nations, made considerable reforms to its formal institutions. However, research on the combined impact of IFRS and disparities in institutional quality in emerging IPO markets remains sparse. Emerging markets represent more than half of economies that use IFRS. Therefore, to the best of the authors’ knowledge, this study is the first to conduct an empirical investigation to identify this combined effect in emerging countries using the DiD analytical technique. Equity market legislators remain concerned regarding IPO underpricing, as it has a detrimental influence on economic growth (Bova and Pereira, 2012; Jamaani and Ahmed, 2021; Mehmoodet al., 2021). Depending on the degree of information asymmetry in national stock markets, underpricing costs increase the cost of going public for entrepreneurs. Consequently, prospective private firms are discouraged from accessing equity financing through the stock markets. This is likely to impede private sector development plans, causing a negative effect on economic growth.Originality/valueEmerging countries represent over 50% of the IFRS mandating economies. However, there is insufficient research on the combined effect of IFRS requirements and improvements in institutional quality in developing IPO markets. To the best of the authors’ knowledge, this study is the first empirical attempt to identify this combined effect in one of the largest developing countries. The results may aid academics and policymakers in better understanding the interaction between these two variables.

IFRS and FPI nexus: does the quality of the institutional framework matter for African countries?

PurposeThe institutional framework of an African country may influence the effectiveness of the International Financial Reporting Standards (IFRS) on foreign investment inflows. The purpose of this paper is to argue that the quality of a country's institutional framework impacts the effectiveness of IFRS to an adopting country and ultimately influences the levels of Foreign Portfolio Investment (FPI).Design/methodology/approachEmploying country-level data. A sample of 15 countries from Africa is used. Data is collected over a period of 22 years (1994–2014). The authors employ the General Method of Moments (GMM) panel regression technique to examine whether the quality of a country's institutional framework has an impact on the relationship between IFRS and FPI and the Propensity Score Matching (PSM) technique to assess the level of impact.FindingsThe findings reveal that the quality of a country's institutional framework moderates the strength of the association between IFRS and FPI. Overall, the authors find that the quality of the institutional frameworks in African countries has a negative effect on the IFRS and FPI nexus.Research limitations/implicationsThe study focuses exclusively on African countries; using an exclusively African sample limits the generalisation of results to other continents like Latin America with similar environments to Africa.Practical implicationsThis study provide evidence that IFRS alone cannot ensure the intended capital market benefits but encourages the development of strong institutions in African countries to realise the most from IFRS adoption. The emphasis on institutional development is an essential contribution that this study makes.Originality/valueThis study is unique since it emphasises the importance of institutional framework quality when considering the impact of IFRS on foreign investment inflows in an African setting.

IFRS adoption and accounting-based performance measures: evidence from an emerging capital market

PurposeThis study aims to examine the economic consequences of the adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. More specifically, the study examines the impact of the mandatory adoption of IFRS on the accounting-based performance measures.Design/methodology/approachData on study variables were obtained manually from the published financial statements of 67 of listed companies in the Saudi stock market during the period 2014–2019. The study addressed the research hypotheses by comparing the accounting-based performance measures computed under the Saudi accounting standards for three years (2014–2016) before the mandatory adoption of IFRS and the corresponding three years (2017–2019) after the mandatory adoption of IFRS. The Mann–WhitneyUTest was used to investigate the significance of differences between the values of performance measures in the pre- and post-mandatory adoption periods.FindingsThe findings of the study revealed that there were no significant differences between the values of accounting-based performance measures related to the three performance categories (i.e. profitability, liquidity and leverage) in the post-mandatory adoption period (IFRS) compared to the values of these measures in the pre-mandatory adoption period (Saudi accounting standards).Research limitations/implicationsThe results of the study indicated that there is a good convergence between the Saudi accounting standards that were implemented before 2017 and the IFRS that began to be applied starting from 2017. This convergence resulted in a low significant impact of IFRS on the financial statements of companies and then on the accounting-based performance measures calculated from them. However, this study suffers from some limitations, the most important of which is the small sample size as a result of the small number of listed companies in the Saudi market during the study period.Originality/valueAlthough the impact of the adoption of IFRS have always been a subject of intense research in developed countries, the study of the impact of the adoption of IFRS in developing countries still limited. This study contributes to the literature by examining the economic consequences of adopting IFRS in Saudi Arabia as one of developing countries.

Capital accounting and liabilities problems in the context of economic processes reforming and international financial reporting standards introducing

Reform in the Russian Federation raises a number of problems, including the regulation of capital and liabilities accounting. The object of the study is the International Financial Reporting Standards impact on the domestic accounting system development, reflecting the economic processes globalisation and digitalisation, the emergence of new accounting objects and increasing requirements for the reporting quality. The essence of newly emerging accounting categories was analysed in the article, the definitions of “liabilities” in the International Financial Reporting Standards and domestic practice were compared. It was identified, that gaps in the capital and liability accounting caused by the lack of a unified conceptual apparatus, the presence of estimated values, the use of an accountant professional judgment that affects the information quality in reporting, the backlog of legislative regulation in terms of accounting for digital objects as authorized capital. The accounting and reporting issues in the reporting of operations of the business social orientation were considered. Possible ways of solving the liability accounting problems are presented, including the conceptual apparatus unification, the accounts chart modernisation, the development of recommendations regarding the application of the accountant professional judgment, the expansion of requirements for the information list on the economic entity activities presented in the accounting (financial) statements, and the International Financial Reporting Standards application.

Does the impact of IFRS on audit fees differ between early and late adopters?

PurposeThis study aims to examine whether the impact of international financial reporting standards (IFRS) on audit fees differs between early and late adopters.Design/methodology/approachThe authors use robust econometric estimation on a sample of 314 firms from both early and late IFRS adopting countries.FindingsThe authors find that IFRS is positively and significantly associated with an increase in audit fees for early adopters, but the impact is very weak for late adopters and insignificant in some cases. The results on auditing time suggest that increase in audit fees around IFRS adoption is due to an increase in audit reporting lags. After accounting for pre- and post-years, the authors find that the relationship between IFRS and audit fees, as well as audit time for late adopters, is significant only in the adoption year. However, early adopters experience a significant increase in audit fees and audit time in the transition year to one-year post-adoption.Practical implicationsThe findings imply that countries that are yet to adopt IFRS are less likely to experience a significant increase in audit fees audit time. Hence, is probable that the benefit of IFRS will outweigh the cost.Originality/valueThe results, therefore, suggest that early adopters paid a premium for been the first users of IFRS, which is consistent with any innovation. The study provides new insights by demonstrating that the consequences of IFRS differ between early and late adopters.

The Use of Accounting Policy Options under IFRS in Europe: Do Country, Industry, and Topic Factors Matter?

Since the formation of the International Accounting Standards Board (IASB), the use of In-ternational Financial Reporting Standards (IFRS) has spread and they have become global standards for financial reporting. However, they are not used unanimously all over the world. This paper focuses on differences in countries’ approaches to IFRS. Our study aims to investi-gate the use of accounting policy choice for selected options in Europe with a particular focus on countries, industry and topic-specific firm factors. We analyze financial statements of 416 companies of the STOXX Europe 600 operating in 17 European countries. We use content analysis to identify the companies’ decisions to choose a particular option allowed under IFRS and run a logistic regression to identify potential factors that influence them. Our findings suggest that the factors under investigation do not always have a significant influence on the accounting option choice. However, the country variables seem to have a stronger influence than industry or topic variables. The study contributes to the body of literature mainly because it investigates a uniform European setting with the use of the 2017 data and it covers coun-tries not included in previous studies. Its results also provide a basis for discussion on the fi-nancial statements quality and the impact of IFRS across countries.

Проблемы и специфика конвергенции национальных учетных систем под влиянием МСФО

The research addresses the essence and outcomes of the convergence between national accounting and reporting systems (NARS) influenced by international financial reporting standards (IFRS). The aim of the study is to identify and examine the main elements of this process and its peculiarities in Russia; to highlight and evaluate the consequences of such convergence; to determine the areas for improving the effectiveness of NARS taking into consideration its current state. The methodology is based on the use of general scientific methods of theoretical and empirical research, including expert assessments and comparative analysis which allows to evaluate the changes observed in NARS. The findings help summarize and analize the organizational aspects of NARS elements transformation in the process of convergence under IFRS impact, including imbalances both in the NARS itself and in the relation between the NARS elements and other systems underlying the national market economic structure. The analysis concludes with an assessment of its effect on the NARS. The results will be of interest to specialists in the field of accounting and reporting as well as to regulatory agencies that implement state interests in this area.

Проблемы и специфика конвергенции национальных учетных систем под влиянием МСФО

The research addresses the essence and outcomes of the convergence between national accounting and reporting systems (NARS) influenced by international financial reporting standards (IFRS). The aim of the study is to identify and examine the main elements of this process and its peculiarities in Russia; to highlight and evaluate the consequences of such convergence; to determine the areas for improving the effectiveness of NARS taking into consideration its current state. The methodology is based on the use of general scientific methods of theoretical and empirical research, including expert assessments and comparative analysis which allows to evaluate the changes observed in NARS. The findings help summarize and analize the organizational aspects of NARS elements transformation in the process of convergence under IFRS impact, including imbalances both in the NARS itself and in the relation between the NARS elements and other systems underlying the national market economic structure. The analysis concludes with an assessment of its effect on the NARS. The results will be of interest to specialists in the field of accounting and reporting as well as to regulatory agencies that implement state interests in this area.

The impact of IFRS on earnings management: evidence from Mexico

PurposePrior literature investigating the adoption of International Financial Reporting Standards (IFRS) finds that managerial incentives, capital market institutions and accounting standards interact to endogenously determine accounting outcomes. In this paper, we investigate the impact of changing from local GAAP to IFRS in 2012 on earnings management by public firms in Mexico. Given the institutional environment and managerial incentives in Mexico, there is not a clear theoretical prediction for the impact of Mexico's adoption of IFRS on earnings management. Thus, it is an empirical question whether a change in accounting standards had any effect on earnings management.Design/methodology/approachWe use three measures of earnings smoothing and one measure of upwards earnings management. Logistic regression analysis along with t-tests across two time periods, pre-IFRS (2009–2011) and post-IFRS (2013–2015) are used to determine if there is a significant change in the earnings management of Mexican firms, and if this change is different for companies cross-listed in the US and companies listed only in the Bolsa.FindingsWe hypothesize and find that adopting IFRS is associated with lower earnings management via earnings smoothing in Mexico, and the reduction is greater for firms cross-listed in the United States. Our results support the contention that strong institutions and enforcement aid in the implementation of new accounting standards.Originality/valueFirst, we contribute to the literature on the adoption of IFRS around the world. The consensus in the literature is that the impact of IFRS on financial reporting is country-specific. To our knowledge, we are the first to conduct such research on Mexico. Second, our findings indicate that IFRS adoption is associated with a reduction in earnings management through income smoothing by firms in Mexico. This contributes to a small but growing body of literature documenting consequences of improvements in Mexican capital markets. Results of research in this area provide important insights to capital market participants and regulators in Mexico.

The Impact of International Financial Reporting Standards on Financial Reporting Quality: Evidence from Iraq

Prior studies provide mixed evidence on whether the transition to International Financial Reporting Standards (IFRS) deters or contributes to greater financial reporting quality. Thus, this research investigates how the transition affects financial reporting quality. This study measures financial reporting quality by earnings management and the value relevance of earnings. Using a sample of listed firms on the Iraq Stock Exchange during 2015–2019, the current study indicates no significant relationship between the transition to IFRS and earnings management. Further, the transition to IFRS positively affects the value relevance of earnings. Thus, collectively, the impact of the transition to IFRS is conditional to the proxies of financial reporting quality. This study contributes to the existing literature by providing empirical evidence regarding the impact of IFRS on financial reporting in an under-studied emerging market. This paper has important implications for regulators, standard setters, listed firms, and other stockholders. It shows that the transition to IFRS has positive effects even in firms from developing countries.

Continued Impact of International Financial Reporting Standards on U.S. Generally Accepted Accounting Principles

The milestone outcomes of over a decade of close cooperation between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) have been highly publicized in the professional media. Great attention has been paid to such joint FASB and IASB projects as accounting for business combinations, fair value measurement, and revenue recognition. The impact of U.S. GAAP on IFRS has also been discussed and highlighted in many professional and academic resources. It should come as no surprise since FASB is considered a world leader in creating high-quality standards through an exemplary standard-setting process. In this paper, we look at the least noticed outcome of the convergence process: the impact of IFRS on U.S. GAAP. We reviewed all of the Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification®, from the first issued in June 2009 to 2016, and listed instances where U.S. GAAP was significantly modified to reflect international solutions. These examples of U.S. GAAP modifications indicate that the impact of IFRS on U.S. GAAP continued well after the bilateral cooperation between FASB and IASB effectively ended in 2014. Furthermore, look at the most recent FASB pronouncement let us conclude that the FASB continues to be engaged in seeking comparable global accounting solutions.

Impact of IFRS on non-cross-listed Spanish companies: Financial analysts and volume of trade

This study aims to analyse, within the scope of publicly listed Spanish companies, whether the mandatory implementation of International Financial Reporting Standards (IFRS) has had an effect on financial analysts’ earnings forecasts and investments in non-cross-listed Spanish companies (those only listed on the Spanish capital market). A sample of 369 observations for companies listed on the Spanish securities market for the period 2004–2007, of which 84 are cross-listed, was used to perform the analysis. The results show that the transition from domestic to international accounting standards has had positive effects for non-cross-listed Spanish companies, leading to the improved accuracy of financial analysts’ earnings forecasts and an increase in investments.

Review on convergence of Indian accounting standards with IFRS by Indian companies

The present literature review encompasses the impact of IFRS in Indian companies and development of new Indian Accounting Standards in line with IFRS. International Financial Reporting Standards (IFRS) or converged Indian Accounting Standards (Ind AS) and its implications are essential for Indian companies. India has decided to converge with IFRS, which means that India will have its own converged accounting standards in line with the IFRS. On January 2, 2015, the Ministry of Corporate Affairs notified (PIB, 2015) that Ind AS would be mandatory applicable for accounting period ending March 31, 2016 for companies falling under certain class. It is expected that once these are implemented, it will have an important impact on financial statements of companies. This convergence will benefit Indian companies as they would be comparable to the peers globally, which in turn would lead to a greater equity and debt participation by global players, thus arranging fund would be easier and cheaper.

The Impact of IFRS in Brazil: The Legacy of Mandatory Book‐tax Conformity

AbstractWe investigate how Brazil's historical and institutional context is likely important in determining the impact and benefits of International Financial Reporting Standards (IFRS) with special reference to the legacy of taxation regulation, referred to as mandatory book‐tax conformity. We hypothesise that in the early period following IFRS adoption, information quality may not significantly improve in the case of companies with limited levels of stock market monitoring because of the path dependency effects of historically important tax considerations. Overall, our results are consistent with the prediction that companies with limited levels of stock market monitoring continue to exhibit book‐tax conformity with no information quality improvements. At the same time, the results relating to companies with higher levels of stock market monitoring are consistent with the expected information quality improvements associated with IFRS adoption.

The Impact of International Financial Reporting Standards (IFRS) Adoption on the Quality of Financial Statements of Banks in Nigeria.

The financial statements of banks are depended upon by a large number of stakeholders. The quality of such financial statements is of paramount importance, especially in the advent of globalization. International Financial Reporting Standards (IFRSs) were developed to ensure not only uniform standard but good quality of financial reporting. In Nigeria, doubts have been raised on financial statements of banks in the last decade to the extent that some of these banks failed. This study sets out to examine the impact of IFRSs on the quality of financial statements of banks in Nigeria with emphasis on the comparability, relevancy and clarity of objectives of Nigerian banks. A case study approach was used to arrive at conclusion drawn from the study. This involves a survey of both internal and external stakeholders using a questionnaire. Data obtained were analysed using the Chi-Square technique. Results show that there is a significant relationship between IFRS adoption and the comparability objectives of Nigerian banks as X2-calculated of 14.96 is greater than the X2-critical/table value of 5.99 at 0.05 LOS. It was further discovered that IFRS adoption has a substantial influenced on the relevancy quality as X2-calculated of 14.0 is greater than the X2-critical/table value of 5.99 at 0.05 LOS. It was also found that IFRS adoption has significantly influence the clarity objectives of Nigerian banks as X2-calculated of 25.4 is greater than the X2-critical/table value of 5.99 at 0.05 LOS. It was concluded that IFRS adoption has significant impact on quality of financial statements of banks in Nigeria. It is recommended that the adoption of IFRS in preparation and disclosure of financial statement should be enforced. Auditors should declare if the accounts comply with the requirements of the standards.

Analysis of the Impact of IFRS on Net Worth of Anonymous Companies

The adoption of International Financial Reporting Standards (IFRS), for recording the economic and financial operations of companies worldwide, makes a great difference in the usefulness and applicability of accounting information. Before this process, the Superintendencia de Companias, Valores y Seguros of Ecuador, has published resolutions for the gradual application to IFRS since 2009. The transition period began in 2010 and ended in 2012. The research analyzed the effects caused to the Net Worth in a group of Ecuadorian companies based on the Positive Theory of Accounting. This analysis determined that the most affected financial accounts in the Process of transition to Property were Plant and Equipment, Intangible Assets and Obligations with Non-Current Financial Institutions.