International Financial Reporting Standards Adoption Research Articles

IFRS adoption, financial reporting quality and cost of capital: a life cycle perspective

PurposeThis paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality and cost of equity. The paper further investigates whether such association varies at different life cycle stages.Design/methodology/approachThis paper follows the methodologies of DeAngeloet al.(2006) and Dickinson (2011) to develop proxies for the firms’ stages in the life cycle.FindingsUsing both pre- and post-IFRS adoption period for Australian listed companies, the paper finds that financial reporting quality reduced and cost of equity increased because of the adoption of IFRS. The paper further evidences that financial reporting quality in the post-IFRS period increased cost of equity. Finally, the paper finds that mature firms produce a better quality of earnings, which result in lower cost of capital. The results indicate that a mature firm was benefited because of the adoption of IFRS.Originality/valueThe finding of this research is useful to the regulators and practitioners to understand the widespread benefit of IFRS adoption.

The Impact of IFRS Adoption on Quality of Accounting Information: Evidence from Sri Lanka

The aim of this study is to examine the effect of International Financial Reporting Standards (IFRS) adoption on quality of accounting information in terms of value relevance of listed manufacturing companies in Colombo Stock Exchange. At present, countries are mandated or permitted to apply IFRS in preparation of their financial statements. There are many studies available on IFRS adoption internationally. However, there is no clear evidence that IFRS adoption enhances the quality of accounting information pertaining to Sri Lankan context. This study employs 29 listed manufacturing companies with both pre-IFRS (2009-2011) and post-IFRS (2013-2015) information. Data were analyzed using multiple regression method. Results showed that value relevance of accounting information has not significantly improved in the post-IFRS period than the pre-IFRS period. Further studies are encouraged to conduct on investigating the impact of IFRS adoption on the quality of accounting information by expanding the sample size.

IFRS adoption and CEO compensation: evidence from listed banks in Nigeria

The study investigates the influence of International Financial Reporting Standards adoption, using accounting performance measure, to determine the CEO pay in listed banks in Nigeria. The audited annual financial statements of listed banks in Nigeria covering the period of 2009–2015 are analyzed. Fixed effect model, viz panel data analysis is adopted to establish the findings. The findings indicate that adoption of IFRS in Nigeria results in an inverse relationship with accounting performance in determining the CEO compensation after controlling for firm and corporate governance mechanism. However, the adoption of IFRS shows significant positive influence on the CEO pay. This result has policy implication, which encourages the regulatory agencies like Central Bank of Nigeria to monitor the compliance of all banks in Nigeria to the IFRS adoption.

Effects of International Financial Reporting Standard (IFRS) on Value Relevance of Accounting Information

The broad objective of this research was to empirically examine the effect of IFRS on value relevance of accounting information. This study employs a longitudinal panel research design. The population of this study covers all quoted banks listed on the Nigerian Stock Exchange. As at the study period, there were only 15 quoted banks on the Nigerian Stock Exchange and this also forms the sample for the study. Secondary data was been used for this study. The data was retrieved from corporate annual reports of the sampled banks for 2010-2017 financial years. The researcher utilizes only corporate annual reports because they are readily available, accessible and also provides a greater potential for comparability of results. More so, they are produced annually and kept in public sphere. The Ordinary least square regression (OLS) was used for the data analysis. The study findings revealed that while IFRS adoption has a statistically significant influence on Earnings per share and Dividend per share value relevance; it has no statistically significant influence on Book value per share value relevance. The study recommends that investors and indeed users of accounting information should still be confident in relying on accounting information prepared by corporate entities in making investment decisions. The study recommends that there is need for companies to comply fully with all IFRS standards in the preparation of financial reports since IFRS adoption was found to have positive effects on value relevance.

Does Mandatory Ifrs Adoption and Macroeconomic Factors Affect Cost of Equity Capital? Empirical Evidence From South African Listed Firms

Purpose: This paper investigates the collaboration of International Financial Reporting Standards (IFRS) adopted and macroeconomic variables interaction with information asymmetry, analysts following and managerial opportunism affecting the cost of equity capital, and also influence investor’s decision taking on companies in South Africa.
 Design/Approach: A sample of 49 listed Johannesburg mining and manufacturing firms was extracted from archival database of INET BFA/IRESS SA, Morningstar, and Anupedia. A leverage fixed effects panel data set of firms from 2001 to 2014 was examined, which shows that Breusch-Lagrange Multiplier tests and the test of over-identifying restrictions used, form the basis of the content analysis of the most recent IFRS effect after mandatory adoption. We used a hand-collected dataset between 2000 and 2015.
 Findings: Our findings suggest that a significant association is found between IFRS and its interactions with managerial opportunism and integrity but with a reasonable statistical effect. However, the IFRS adoption effect on the cost of equity capital of South African firms’ has no significant effect.
 Practical implications: This study reveals that most firms report more, the credibility of annual financial statements which may not be sufficient because of the qualitative data for an assessment of managerial opportunism, information asymmetry and analysts following. Of such myopia of company managers, their reputation causes agency problems and as a result, shareholders interest is mainly focused on improving reporting standards
 Originality: The research considers dual harmonizing facets: first, that the interaction with IFRS adoption and economic factors impact on the cost of equity capital may be so pathetic and obvious; and second, that IFRS moderation impacts on the cost of equity capital in Sub- Saharan African. This finding should be meaningful to managers, analysts, policymakers, and supervisory bodies in nations with similar capital structure decisions and socioeconomic systems.

The Impact of International Financial Reporting Standards (IFRS) on Accounting Quality in Malaysia

There are two objectives of this study, first,it is to examine and compare the accounting quality in pre-and post-implementations IFRS from the viewpoint of investors. Second ,is to identify the differences in the accounting quality between the shariah compliant and non-shariah compliant companies in pre-and post-implementations of IFRS. Using 2169 firm-year observations from firms listed on the Bursa Kuala Lumpur Stock Exchange over the period of 2008 to 2016, the result shows that the implementation of MFRS have reduced the firms’ earnings management. However, this study provides new arguments that Shariah-complaints firms in Malaysia do not necessary have greater incentives to report high-quality reporting based on the investor perspectives. Our evidence thus help to explains the different impact on IFRS adoption on accounting quality in Malaysia and shariah complaint compnaies.

Has IFRS Enhanced Accounting Uniformity?

ABSTRACTI examine the effect of International Financial Reporting Standards (IFRS) adoption on the accounting uniformity of financial statements for a sample of large firms listed on Euronext. Using Taplin’s (A unified approach to the measurement of international accounting harmony*. Accounting and Business Research, 34(1), 57–73) uniformity index, I find that IFRS enhances uniformity of financial statements of firms within the same country (national uniformity) and between countries (international uniformity). The change in uniformity is not, however, homogeneous within and across jurisdictions that are subject to different accounting regulations before IFRS adoption. Those countries whose local GAAP was further from IFRS prior to adoption experience a greater increase in uniformity after IFRS adoption. I also find that international uniformity is increased most for items where IFRS eliminated divergence with local GAAP and for items where no regulation existed under local GAAP; when IFRS preserved the accounting choice set prescribed under local GAAP, uniformity does not increase. The main contribution relies on showing that the various forms of the relationship local GAAP-IFRS prior to the shift matter when examining the direct effect of IFRS adoption on the convergence of financial reporting practices.

ANALISIS PERBEDAAN KUALITAS AKUNTANSI DAN TATA KELOLA SEBELUM DAN SETELAH PENERAPAN PSAK KONVERGENSI IFRS

The International financial reporting standard (IFRS) is an international financial reporting standard that aims to make financial reports comparable and have a high level of reliability. Indonesia carried out the full implementation of the term 'coverage' in 2012. Thus, it is expected that the accounting quality will be better after the implementation, as well as the governance practices. This study aims to find out empirically, whether there are differences in accounting quality as measured by earnings quality and accounting conservatism and governance before and after the application of PSAK that refers to IFRS. This research uses companies listed on the Indonesia Stock Exchange, especially consumer groups from 2008 to 2015 (2008-2011 before full adoption of IFRS and in 2012-2015 after full adoption of IFRS). There are 18 companies that fit the criteria. The hypothesis test results show that there is no difference in accounting quality based either on earnings quality or conservatism before and after the implementation of IRFS. However, governance shows a difference between before and after the implementation of IFRS.

The role of Politics and Economics in the International Financial Reporting Standards (IFRS) Adoption

IFRS adoption in EU since 2005 conveys benefits, but the evidence shows that they are unevenly distributed among different countries due to differences in institutions and incentives. The Contracting Theory offers a theoretical framework for the research on economic consequences and incentives of different stakeholders to lobby, but research on activity of politicians to interfer in accounting is scarce. The aim of this paper is to show the role of politicians and governments on accounting properties. With this purpose changes done in the EU endorsement process in the name of the “pubic interest” are analyzed. Research on how political interference has worked, especially in the financial industry is shown. We conclude that interested parties should compromise to get a balance between principle based standards and enforcement to improve the comparability process through IFRS.

Information Content of Earnings Announcements Around IFRS Adoption and a Simultaneous Change in Press Release Disclosure in Italy

This study examines the effect of a security regulation that occurs simultaneously with International Financial Reporting Standards (IFRS) adoption on the information content of earnings announcements in Italy. To identify the effect of this regulation, we use a treatment and a control sample of IFRS countries that vary in the adoption of the security regulation, but are similar along a set of accounting and institutional dimensions (Italy versus France, Belgium, and Portugal). We find that the increase in information content of earnings announcements is more pronounced in Italy (treatment sample). Further, we analyze non-earnings disclosures using 2106 earnings announcements and find that the inclusion of IFRS-based detailed financial statements in earnings announcements contributes to the increased informativeness of IFRS earnings announcements. Our results provide support to the notion that regulatory changes concurrent with IFRS adoption are necessary to yield capital-market benefits.

Construção de uma narrativa hegemônica sobre a adoção das IFRS no Brasil

Resumo A convergência das normas contábeis brasileiras às Normas Internacionais de Contabilidade (International Financial Reporting Standards - IFRS) foi impulsionada pela criação do Comitê de Pronunciamentos Contábeis (CPC), em 2005, e pela Lei n. 11.638/2007. Entretanto, os aspectos políticos desse processo, tais como o papel da academia na legitimação das IFRS, têm sido pouco explorados. Assim, propomos neste artigo uma análise crítica do discurso, tendo como objeto o capítulo de livro “Convergência da contabilidade brasileira às Normas Internacionais de Contabilidade (IFRS): retrospectiva histórica e desafios para o futuro”, de autoria de Salotti, Carvalho e Murcia (2015), almejando identificar as principais estratégias discursivas empregadas para construir uma narrativa hegemônica sobre a adoção das IFRS no Brasil. No referencial teórico, discutimos os conceitos de ideologia e hegemonia, assim como os papéis dos intelectuais e da academia na construção e disseminação de narrativas ideológicas. Empiricamente, por meio da análise crítica do discurso, as propriedades formais do texto são descritas, apontando seus valores experienciais, expressivos e relacionais. Além disso, propomos uma interpretação do processo de produção e uma explicação das condições sociais de produção do texto. O silenciamento de vozes dissonantes, a omissão de agência e a representação da comunidade e das práticas contábeis brasileiras em condição de inferioridade técnica e cultural são identificados como principais estratégias discursivas empregadas no texto para reproduzir e ratificar discursos do campo profissional, valendo-se do capital simbólico possuído pelos autores em virtude da posição que ocupam no campo acadêmico para atribuir universalidade a entendimentos dos organismos normatizadores.

Determinants of adoption of International Financial Reporting Standards in Ugandan micro finance institutions

PurposeThe purpose of this paper is to report on the results of a study carried out to establish the contribution of board of directors’ effectiveness, intellectual capital (IC) and managerial attitude to the adoption of International Financial Reporting Standards (IFRSs) in microfinance institutions (MFIs).Design/methodology/approachThis study is cross-sectional and correlational. Data were collected through a questionnaire survey of 67 MFIs that are members of the Association of Microfinance Institutions of Uganda. The data were analyzed using statistical package for social sciences.FindingsBoth board of director’s effectiveness and IC positively and significantly contribute to the adoption of IFRSs. Managerial attitude is positively and significantly associated with the adoption of IFRSs, but its explanatory power is subsumed in IC.Originality/valueTo the authors’ knowledge, this is the first study to investigate the contribution of board of director’s effectiveness, IC and managerial attitude to the adoption of IFRSs in MFIs using evidence from a developing African country like Uganda.

International Financial Reporting Standard (IFRS) Adoption and Economic Growth: A Study of Nigeria and Kenya

This study examines the effect of IFRS adoption on economic growth, using Nigeria and Kenya, for the period 2000-2016. The data which was utilized in this study, was gotten from National bureau of statistics. Descriptive statistics and paired sample t-test were used to analyze the data. Manufacturing sector Gross domestic product (GDP) was used to proxy Economic growth. However, the findings show that there is a significant difference in Economic growth of Nigeria and Kenya between pre and post IFRS adoption. Hence, the study recommends that government should ensure the fully adoption and implementation of IFRS in every possible sector in other to enjoy other benefits that accrue from it. Also, further studies on IFRS adoption and economic growth should employ other variables not used in the study.

Accountants’ Perception on the Factors Affecting the Adoption of International Financial Reporting Standards in Yemen

This study examines accountants’ perception whether or not the following factors ــgovernment policy, capital market, economic growth, external environment/international exposure, professional bodies, education level of accountants, company size, initial cost of International Financial Reporting Standards (IFRSs) adoption and culture affect the adoption of IFRSs in Yemen. It also examines the differences of opinion among academicians and practitioners with regard to these factors. A questionnaire survey involving 41 Yemeni accounting postgraduate students in Malaysia’s public Universities was conducted. The results indicate that the majority of respondents believe that the lack of government policy, absence of capital market, lack of economic growth, lack of professional bodies, weakness in the education level of accountants, the small size of the companies and initial cost of IFRSs adoption affect the adoption of IFRSs in Yemen. The study also shows that the international environment has a weak effect on IFRSs adoption while the Yemeni culture does not affect IFRSs adoption. The finding may help both policy-makers and the Yemeni Association of Certified Public Accountants (YACPA) to consider these factors and make more precise decisions regarding IFRSs adoption.

IFRS Adoption and Bank Performance in Nigeria and Canada Banks

The aim of this study is to examine the effect of adopted International Financial Reporting Standards (IFRS) adoption on the financial performance of banks in Nigeria and Canada. The study made use of cross sectional data obtained for a period of 10 years from 2006 to 2017, while the regression analysis was used to examine the impact of IFRS adoption on the earnings of 5 banks in Nigeria and Canada. The study found a significant and positive relationship between IFRS adoption and the banks in Nigeria and Canada. The study concludes that IFRS adoption has improved the decision making capability of the various stakeholders, thus, increasing investor confidence. The study suggests that, in order to safeguard the suitable adoption of IFRS in Nigeria and Canada, competent Accountants and Auditors in IFRS are required in large number and that the Institute of Chartered Accountants of Nigeria and Canada must intensify it efforts in organizing IFRS based training programs for its members and other parties connected with corporate reporting.

International Financial Reporting Standard (IFRS) Adoption and Foreign Direct Investments (FDI): A Comparative Analysis of Nigeria and Ghana

This study examined the relationship between IFRS adoption and FDI in Nigeria and Ghana. Using ordinary least square as well as other diagnostic test, findings show a negative but insignificant relationship between IFRS adoption and FDI in Nigeria. Also, it was discovered that IFRS adoption has a positive and significant relationship in Ghana. Findings also show that IFRS adoption alone would not lead to FDI inflows and FDI is affected by other factors such as exchange rate, inflation and political instability. The study recommends that Effective execution of IFRS requires strategic planning and IFRS ought to be linked to an objective for it to have a beneficial outcome.

Principles-Based Accounting Standards, Earnings Management and Price Efficiency

The issue of principles-based accounting standards has been attracting growing interest since the emergence of the International Financial Reporting Standards (IFRS) as a global phenomenon, and the United States consideration of IFRS adoption. This paper studies the effect of a move towards principles-based accounting standards on price efficiency in the equity market. I assume a move towards principles-based standards requires the firm’s manager to use more of his private, though more subjective, information for financial reporting. I model the manager’s reporting decision as a trade-off between increased compensation through earnings management and a cost associated with earnings management (such as litigation, SEC enforcement, and manipulation effort). I find that the effect of a move towards principles-based accounting standards on price efficiency is non-monotonic. When standards are highly rules-based, reducing the use of rules-based standards increases price efficiency. However, at some point, this relation reverses. The optimal mix of rules and principles reflects a trade-off between two types of effects on price efficiency: predictive ability and comparability. In addition, expected earnings management is non-monotonic in the use of rules-based standards. Finally, I find that rules intensity and managerial compensation incentives act as complements, such that higher managerial compensation incentives require more rules-based standards for price efficiency to be maximized.

The real earnings management of cross-listing firms

We examine the existence of real and accrual-based earnings management before and after cross-listings on the U.S. market. The results indicate that firms actively manage their earnings around cross-listing events, using both accrual and real earnings management, but real earnings management is dominant. American Depositary Receipts (ADRs) cross-listed at Level 1 and sponsored ADRs show the largest increase in real earnings management from before to after the listing. Firms that have adopted International Financial Reporting Standards (IFRS) display lower increases than firms under domestic GAAP. Finally, our results confirm a significant negative relationship between long-run performance and real earnings management before and after major corporate events.

Disclosure Style and Its Determinants in Integrated Reports

Integrated Reporting promotes a more cohesive and efficient approach to corporate reporting and aims to improve the quality of information available to providers of financial capital. The purpose of this paper was to investigate the determinants of readability and optimism which build the disclosure style of integrated reports. Our research draws on impression management theory and legitimacy theory, while also taking into consideration the cultural system of Hofstede with its further developments by Gray. Our sample consisted of 30 annual reports, extracted randomly from the Integrated Reporting examples database set up by the International Integrated Reporting Council. For the purposes of our investigation, we have carried out a multivariate regression analysis. Firstly, our results show that the higher the revenues of the reporting company, the more balanced their integrated reports, while younger companies use a more optimistic tone when reporting. Additionally, optimism seems to be inversely correlated with the length of the reports. Secondly, entities based in countries with a stronger tendency towards transparency surprisingly provide less readable integrated reports. It was also revealed that companies operating in non-environmentally sensitive industries, as well as International Financial Reporting Standards adopters deliver foggier and thus less readable integrated reports.

Bank earnings smoothing during mandatory IFRS adoption in Nigeria

PurposeThe purpose of this paper is to examine the extent of bank earnings smoothing during mandatory International Financial Reporting Standards (IFRS) adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks.Design/methodology/approachThe authors employ panel regression methodology to estimate the association between loan loss provisions (LLPs) and bank earnings.FindingsThe authorse find that the mandatory adoption of IFRS is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use LLPs to smooth reported earnings during the mandatory IFRS adoption period. The authors find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria.Practical implicationsOverall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs estimates to smooth earnings during the period of mandatory IFRS adoption.Social implicationsThe implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined.Originality/valueThis study is the first attempt to focus on income smoothing during mandatory IFRS adoption in Nigeria.