International Financial Reporting Standards Regime Research Articles

The impact of IFRS adoption on IPOs management earnings forecasts in Australia

This study investigates the accuracy of management earnings forecasts under International Financial Reporting Standards (IFRS) in the context of an initial public offering (IPO). We observe a decline in management forecast errors (FEs) in Australia following the mandatory implementation of IFRS in 2005. Further evidence suggests that IPO management earnings forecasts become more conservative after IFRS was required. We argue that IFRS enables investors to better evaluate IPO firms’ performance and demand higher returns from firms that report inflated and inaccurate earnings forecasts. We also show that over-optimistic earnings forecasts and larger forecasting errors result in greater underpricing under the IFRS regime. Overall, this study suggests that IFRS, as a set of high-quality accounting standards, improves corporate disclosure quality and the information environment.

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.

Impact of ambiguity tolerance and tertiary education on professional judgment

ABSTRACTWe examine whether tertiary accounting education enables students to develop relevant expertise to tolerate ambiguity in International Financial Reporting Standards (IFRS) and exercise appropriate professional judgment. The results show that third-year accounting students are more tolerant of ambiguity than first-year students, though the difference is insignificant. A significant difference exists between first-year and third-year students in their preference for using IFRS across ten financial reporting contexts. The findings reveal that IFRS-based tertiary accounting education programs have a positive impact on preparing accounting students to practice under IFRS regime, hence accounting standard setters and educators should focus on enhancing such programs.

Impact of ambiguity tolerance and tertiary education on professional judgment

We examine whether tertiary accounting education enables students to develop relevant expertise to tolerate ambiguity in International Financial Reporting Standards (IFRS) and exercise appropriate professional judgment. The results show that third-year accounting students are more tolerant of ambiguity than first-year students, though the difference is insignificant. A significant difference exists between first-year and third-year students in their preference for using IFRS across ten financial reporting contexts. The findings reveal that IFRS-based tertiary accounting education programs have a positive impact on preparing accounting students to practice under IFRS regime, hence accounting standard setters and educators should focus on enhancing such programs.

Does International Financial Reporting Standards (IFRS) Impact Profitability Ratios of Listed Banks in Nigeria?

This study provides an empirical analysis of the impact of IFRS on profitability ratios of eleven (11) banks in Nigeria. The study addresses the research hypotheses by comparing the key profitability ratios computed under the Pre-IFRS for three year period from 2009-2011 and three year period from 2013-2015 under the Post-IFRS regime. The study used Wilcoxon Signed Rank test and Normality test as a statistical method to analyze the data. The findings revealed that IFRS adoption has not produced any meaningful impact on the profitability ratios (PAT-EBIT, NPM, and OPM) at 5% level of significance. The finding implies that the adoption of IFRS does not have significant effects on profitability ratios of listed banks in Nigeria. The study recommends that investors and financial analyst should pay particular attention to all profitability ratios under this IFRS regime. Also, investors should not base their investment decisions on banks’ profitability in the short term but rather the long-term viability and performance should be taken into cognizance. This study provides original insight into the relevance of IFRS in determining the viability or otherwise of profitability ratios of listed banks in Nigeria.

International Financial Reporting Standards (IFRS) Adoption and the Performance of Key Financial Ratios : Evidence from Quoted Deposit Money Banks in Nigeria

Financial ratio is one of the performance measures used by investors to determine the viability of a firm. In view of this assertion, this paper investigates the effect of IFRS on key financial ratios of 11 quoted banks in Nigeria. The study addresses the research hypotheses by comparing the key financial ratios computed under the NGAAP for the three-year period, 2009-2011 and the corresponding three-year period under IFRS regime, 2013-2015 using the Mann Whitney U-Test. The study investigates the effect of IFRS on key financial ratios of listed banks in Nigeria. Evidence from the study shows that at 5 per cent level of significance: (i) Profitability ratios of listed banks under NGAAP differ significantly from those under the IFRS regime. (ii) There is statistically significant difference between short-term solvency ratios of quoted banks under NGAAP and IFRS. (iii) Long-term solvency ratios of quoted banks under NGAAP are significantly different from those under the IFRS regime. (iv) There is significant difference between investment ratios, of listed banks, prepared under NGAAP and IFRS. Based on the above results, the study concludes that adoption of the International Financial Reporting Standard (IFRS) has significant impact on the performance of financial ratios of quoted deposit money banks in Nigeria

Effects of IFRS Adoption on Tax-induced Incentives for Financial Earnings Management: Evidence from Greece

We investigate whether the adoption of International Financial Reporting Standards (IFRS) in Greece affected tax-induced incentives for financial earnings management. Prior to the implementation of IFRS, there were powerful incentives for firms facing higher tax pressure to restrict (exacerbate) upward (downward) financial earnings management due to direct tax implications. IFRS adoption reduced book–tax conformity, thereby releasing financial income from tax implications. As expected, we find that tax pressure is a significant negative determinant of discretionary accruals in the pre-IFRS period. However, this effect dissipates under the new IFRS regime.

IFRS and environmental accounting

Purpose – The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) can be used for monitoring environmental degradation. A comprehensive review of academic and professional literature indicates that the IFRS regime provides useful conceptual and practical frameworks for monitoring firms that are operating in environmentally sensitive industries.Design/methodology/approach – Using qualitative and case study research methods, the financial statements of three environmentally sensitive companies were studied.Findings – The sustainability reports produced by the companies contained both information and propaganda. The credibility of published sustainability reports is unclear. The size and adequacy of the contributions of the companies towards sharing the costs of decommissioning, rehabilitation and restoration of the environment are not disclosed. A new statement is proposed.Practical implications – Policy implications at national and international level are many.Soc...

Implementing IFRS in local government: value adding or additional pain?

PurposeThe aim of this paper is determine the impact financial reporting obligations and, in particular, the International Financial Reporting Standards (IFRS) have on local government management decision making. In turn, this will lead to observations and conclusions regarding the research question: “Does reporting under the IFRS regime add value to the management of local government?”Design/methodology/approachFollowing analysis of a survey instrument distributed to all local governments in all states of Australia, this research reports on interviews within Australia's largest state – New South Wales (NSW).FindingsIn general, findings suggest that for smaller councils and those situated away from the major cities, the time spent on complying with IFRS and various other legislative demands results in management accounting issues often being downplayed.Research limitations/implicationsA further paper needs to be conducted in order to determine in the second year of implementation the impact of IFRS – both in Australia and, in the future, in other countries – where local government is implementing IFRS. Practical implications will be evident when all Australian states are compared as NSW is the only state where an IFRS template has been produced for all local authorities.Originality/valueThis is the first known analysis of IFRS in local government in Australia, and possibly the world. It utilises both survey and interview instruments within an institutional theory framework to capture the full richness of data available.