International Financial Reporting Standards Research Articles

Examining the Impact of International Financial Reporting Standards Adoption on Financial Reporting Quality of Multinational Companies

Examining the Impact of International Financial Reporting Standards Adoption on Financial Reporting Quality of Multinational Companies

Can IFRS adoption mitigate earnings management in an emerging market?

Research on the impact of the International Financial Reporting Standard (IFRS) mandate on the quality of financial reporting produced mixed findings. Several researchers showed that the IFRS mandate depresses earnings management since it improves comparability, and the principle-based approach offers limited alternatives for managers in reporting. Others have shown that it provides flexibility for managers in institutionally and legally weak countries. We examine whether the IFRS mandate depresses earnings management practices in South Africa. Using a sample of 206 firms listed on the Johannesburg Securities Exchange (JSE) from 2000 to 2010, our findings show that the IFRS mandate significantly reduces earnings management. Our findings contribute to the ongoing discussion about whether high-quality standards effectively mitigate earnings management practices and protect stakeholder rights in developing countries.

The role of accounting standards in financial inclusion

Studies have shown that the adoption of high-quality accounting standards such as International Financial Reporting Standards (IFRS) induces diverse economic outcomes by enhancing trust, transparency and market discipline. This paper examines the role of accounting standards in enhancing financial inclusion. Using the World Bank Global Findex database and the dataset on IFRS adoption by Song and Trimble (2022), we find that the adoption of IFRS increases the access and use of financial services. Shedding insight into our main findings, we show evidence of two underlying mechanisms through which the adoption of IFRS may foster financial inclusion: (i) enhancing trust and transparency in the financial system and (ii) reducing perceived corruption. Also, the beneficial effect of IFRS adoption on financial inclusion is evident in both developed and developing countries, suggesting that both developed and developing countries can leverage the adoption of IFRS as a tool for promoting greater financial access and usage. Furthermore, the documented increase in financial inclusion is more pronounced in countries with high regulatory and enforcement mechanisms. Robustness tests including instrumental variable approach confirm our findings. By providing evidence of the positive effect of IFRS adoption on financial inclusion, this paper has practical implications for policymakers and standard setters.

Mommy don’t go: The stories of separation anxiety of kindergarten pupils thru the lens of mothers

The evolution of financial reporting standards has been marked by significant shifts from the traditional Generally Accepted Accounting Principles (GAAP) to the globally recognized International Financial Reporting Standards (IFRS). This research explores the historical development, key differences, and implications of transitioning from GAAP to IFRS, along with emerging trends that may shape the future of financial reporting. Through a mixed-methods approach, including qualitative interviews with accounting professionals, auditors, regulatory bodies, and quantitative analysis of financial data from organizations that have undergone this transition, the study aims to provide a comprehensive understanding of the impact of IFRS adoption on financial transparency, comparability, corporate governance, and investor behavior. The findings indicate that IFRS adoption improves financial transparency and comparability, positively influences corporate governance, and enhances investor confidence. Furthermore, the study highlights the growing importance of Integrated Reporting (IR) and Sustainability Reporting, as well as the transformative role of technology in financial reporting. Future research should focus on longitudinal studies to assess the long-term impacts of IFRS adoption and explore the integration of emerging technologies, such as blockchain and artificial intelligence, in financial reporting. These insights will be valuable for policymakers, businesses, and stakeholders in navigating the evolving landscape of financial reporting, ensuring better decision-making and enhanced global financial coherence.

The economic nature and process of formation of accounting estimates and accounting valuations

Subject. Amendments to IAS 8 and, as a result, the revision of the essence of the category Accounting Estimate necessitate the improvement of the Russian methodological framework based on the previous version of the International Standard. When conducting an audit in Russia in accordance with international standards, auditors analyze the category Accounting Estimate, the essence of which is described in IFRS. The article discusses the discrepancy between the essence of the category Accounting Estimate used in the Russian practices of accounting and auditing. Objectives. The article aims to study the essence of the category Accounting Estimate used in the Russian accounting practice, conduct a comparative analysis of the category under study and the category Accounting Estimate in the International Standards on Auditing (ISA) and Accounting Valuation in the International Financial Reporting Standards (IFRS). Methods. For the study, I used a systems analysis, the method of comparative research, structuring information, data grouping, deduction, and other methods. Results. The article clarifies the definitions of the categories Accounting Estimate and Accounting Valuation, distinguishes these categories, and proposes an interrelated categorical system that unites the concepts under consideration. In addition, the article presents the author-developed consolidated list of disclosures of information on accounting estimates and related accounting estimates in financial statements. Conclusions. The proposals made can increase the degree of harmonization of Russian and International Standards, unify Russian accounting and auditing practices in relation to accounting valuations and accounting estimates.

A critical analysis of government grants accounting approaches. Part 1

Subject. This article discusses the theoretical, historical and methodological particularities of State assistance accounting, including the socio-economic relations that have developed between companies, developers of accounting standards and the academic community. Objectives. The article aims to critically characterize approaches to State assistance accounting, show the theoretical inconsistency of the International Financial Reporting Standard (IAS) 20 – Accounting for Government Grants and Disclosure of Government Assistance, and choose the most appropriate method that corresponds to the guideline scientific concepts. Methods. The research is speculative. For the study, I used the dialectical method of scientific knowledge, the method of collecting theoretical and regulatory information, the method of formalization, as well as analysis, synthesis, observation, and comparison. Results. The scientific novelty lies in the generalization and characterization of five approaches to the accounting for State assistance. The article substantiates that State assistance should be recognized as part of liabilities if and only if there are current and/or future conditions that impose obligations on the organization to receive State assistance, otherwise it should be recognized exclusively as part of equity. It is found that the background of these standards in the area of accounting for State assistance is the result of lobbying companies to increase net income. Conclusions and Relevance. The results of the study call into question the acceptability of the theoretical foundation of IAS 20. The results of the study are primarily intended for the accounting scientific community and developers of accounting standards.

Does International Financial Reporting Standards adoption improve or impede comparability? New evidence from Chinese dual‐class firms

Does International Financial Reporting Standards adoption improve or impede comparability? New evidence from Chinese dual‐class firms

Readiness and Challenges of Companies in Timor-Leste in Adopting International Financial Reporting Standards (IFRS)

Readiness and Challenges of Companies in Timor-Leste in Adopting International Financial Reporting Standards (IFRS)

The Needs and Readiness of the Islamic Banks to Adopt the Comprehensive Islamic Accounting Standards: The Malaysian Experience

The Islamic finance sector in Malaysia has seen substantial growth over the past few decades, becoming one of the leading markets for Islamic financial products and services. This growth has brought about significant challenges in financial reporting, primarily due to the limitations of conventional International Financial Reporting Standards (IFRS) in addressing the unique characteristics of Islamic financial transactions. The shari’ah transactions are governed by Shariah principles, which prohibit interest (riba) and emphasize on risk-sharing, ethical investments, and social justice. The study aims to provide a comprehensive analysis of the current issues and debates surrounding the need for comprehensive Islamic accounting standards in Malaysia. It will review recent literature, regulatory developments, and the experiences of practitioners in the particular field. Furthermore, the report seeks to highlight the readiness of Bank Negara Malaysia and all Islamic Banks to adopt Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) standards and explore the feasibility of integrating these standards within the International Financial Reporting Standard (IFRS) framework. Additionally, this report aims to contribute to the ongoing discourse on Islamic accounting by offering critical insights and recommendations for policymakers, regulators, and financial institutions. The ultimate goal is to enhance the transparency, comparability, and reliability of financial reporting in the Islamic finance sector, thereby promoting its sustainable growth and integration into the global financial system.

Impact and Significance of Accounting Standards in Enhancing Financial Transparency within Pakistan’s Textile Industry

The investigation assesses the extent to which accounting standards foster financial openness in Pakistan's textile sector, which makes a substantial economic contribution to the country through employment, exports, and income generation. Accounting standards guarantee financial reporting's comparability, consistency, and dependability, which are critical for stakeholders' decision-making, including lenders, investors, and regulatory agencies. Implementing local standards established by the Institute of Chartered Accountants of Pakistan and International Financial Reporting Standards improves accountability and transparency in Pakistan's textile sector. Even with their advantages, the complicated regulatory environment, shifting market conditions, and disparities in compliance among various firms make it difficult to adopt these standards. This evaluation looks at how following these guidelines affects the transparency of financial statements, lowers fraud rates, and lessens the chance of financial misreporting. It also discusses the sector-specific issues that Pakistan's textile industry faces, such as differences in revenue recognition, inventory value, and related party transaction disclosure that can skew evaluations of financial health. The evaluation emphasizes the role of sound accounting procedures in promoting investor trust and, importantly, in streamlining regulatory supervision, which should give the audience confidence in the oversight of the industry. Additionally, it assesses current measures to enhance compliance, such as ICAP's attempts to harmonize national standards with IFRS and government incentives for better corporate governance in the sector. Standardized accounting procedures enable sustainable growth in Pakistan's textile sector and improve the nation's standing internationally by fostering a transparent financial environment.

Strengthening corporate governance and financial compliance: Enhancing accountability and transparency

In today's complex business landscape, robust corporate governance and financial compliance are essential for maintaining organizational integrity, accountability, and transparency. This review examines the key components and strategies necessary to enhance these frameworks, ensuring sustainable success and stakeholder trust. Corporate governance encompasses regulatory compliance, risk management, ethical conduct, and stakeholder engagement. Adherence to laws and regulations, such as the Sarbanes-Oxley Act (SOX) and the General Data Protection Regulation (GDPR), is foundational in minimizing legal risks and safeguarding reputation. Effective risk management involves identifying, assessing, and mitigating potential threats to an organization’s financial health and operational integrity through strong internal controls and regular audits. Promoting ethical conduct within organizations is crucial for maintaining trust and reputation. Establishing codes of conduct, ethical guidelines, and whistleblower protections fosters a culture of integrity. Transparent communication and stakeholder engagement ensure that organizational activities align with stakeholder interests and expectations. Enhancing accountability and transparency involves several key strategies. Strong board oversight and independence, characterized by diverse and skilled board members, ensure balanced and objective decision-making. Regular internal and external audits verify financial accuracy and compliance, identifying areas for improvement. Leveraging technology and data analytics is pivotal in modern compliance efforts. Technologies like blockchain, artificial intelligence (AI), and machine learning automate processes, improve accuracy, and provide real-time insights into financial performance and risk management. Transparent regulatory reporting and disclosure practices, adhering to standards such as the International Financial Reporting Standards (IFRS), further enhance stakeholder trust. Continuous training and education for employees and board members on corporate governance principles, regulatory requirements, and ethical standards are vital for fostering a culture of compliance and accountability. Strengthening corporate governance and financial compliance is fundamental for enhancing accountability and transparency. By adopting comprehensive regulatory frameworks, leveraging technology, and promoting ethical conduct, organizations can build trust, mitigate risks, and ensure sustainable growth in a dynamic business environment. Keywords: Corporate Governance, Global Corporations, Harmonization.

Taking a Look at the Pros and Cons of Moving to International Financial Reporting Standards (IFRS): An Indian Perspective

Taking a Look at the Pros and Cons of Moving to International Financial Reporting Standards (IFRS): An Indian Perspective

Contribution to the Study of the Impact of IFRS on the Quality of Information and Financial Markets: Which Theories are Used?

The aim of this article is to examine the extent to which theories of financial market effi-ciency, agency and signaling can be used to study and understand financial phenomena, in particular conflicts of interest between managers and shareholders, and investor behavior in financial markets following the transition to International Financial Reporting Standards (IFRS).

Міжнародний досвід бухгалтерського обліку маркетингових витрат

The international aspects of marketing cost accounting cover various approaches and practices that influence companies’ management decisions and financial reporting worldwide. Implementing International Financial Reporting Standards (IFRS) ensures the unification of methods for recognizing and classifying marketing expenses, contributing to transparency and comparability of financial and non-financial data. Different countries adapt these standards to their economic and regulatory characteristics, leading to variations in accounting practice. Analysis of international experience allows business entities to improve management strategies and increase cost efficiency. Studying these aspects is critical to ensuring competitiveness and stability in the global business environment. The article aims to summarize the priority international approaches to the recognition and measurement of marketing expenses in financial statements. The study used deduction, analysis, synthesis, and generalization methods. It is established that the primary documents regulating the accounting treatment of marketing costs include IAS 38 «Intangible Assets» (for capitalization of marketing costs, if justified) and IAS 15 «Revenue from Contracts with Customers» (for advertising and promotion costs related to contracts). One of the most promising types of marketing in today’s conditions is digital, which is confirmed by the amount of financing in European countries. The international standards governing the accounting of marketing costs are generalized. The results obtained can be used to improve domestic UAS and develop internal regulations for business entities. We see promising areas for further research in studying the issues of consistency between international and national accounting standards to identify common and distinctive features and areas for improving domestic regulations, as well as developing primary and reporting forms that will allow an objective reflection of their financial basis and serve as an essential source of data for management personnel. Keywords: marketing expenses, accounting, IFRS, marketing, advertising.

Ambiguity in international financial reporting standards (IFRS) and its impact on judgments of auditors

PurposeThis paper aims to conduct an experiment that investigates the effect of the ambiguity present in international financial reporting standards (IFRS) on the judgments of auditors. This paper also examine the effects of the personality trait of ambiguity tolerance on judgments of auditors.Design/methodology/approachThis paper conduct an experiment in which experienced Australian-based auditors are placed in hypothetical revenue recognition and lease classification decision contexts. The participants are members of the Australian accounting profession who are familiar with applying IFRS.FindingsThis paper find support for the perception that when the relevant IFRS are more ambiguous, auditors make less aggressive reporting judgments compared to when the IFRS are less ambiguous. The results also unveil a novel finding that auditors who are more tolerant of ambiguity are likely to choose the accounting treatment that best reflects the economic substance of a transaction when interpreting IFRS compared to those who are less tolerant of ambiguity.Practical implicationsThese results would be of interest to policymakers and accounting researchers as they continue to contemplate a shift to more principles-based IFRS.Originality/valueTo the best of the authors’ knowledge, this study is the first to examine the influence of an individual’s ambiguity tolerance on financial reporting quality in jurisdictions that have adopted IFRS.

OPTIMIZATION OF MANAGEMENT DECISIONS IN TAX RELATIONS: NEW TECHNOLOGIES AND STANDARDS IN ACCOUNTING PROCESSES

The article addresses the critical role of accounting information in the context of tax relations, particularly in the dynamic business environment influenced by globalization. It emphasizes the necessity for structured data organization and information flow to enhance managerial decision-making processes. A significant focus is placed on the quality of accounting data, which is foundational for effective tax reporting and compliance. The study reviews existing literature, highlighting the contributions of Ukrainian researchers who stress the importance of relevant and high-quality accounting information for decision-making. The paper aims to explore the evolving approaches to accounting data formation, driven by globalization and the challenges it presents in tax interactions. It discusses the implications of adopting International Financial Reporting Standards (IFRS), which have been developed to ensure transparency, comparability, and high-quality financial reporting across borders. The article notes that while IFRS adoption is mandatory for many entities in Europe, discrepancies in implementation exist among member states, leading to varied disclosure requirements. Furthermore, the introduction of the Standard Audit File for Tax (SAF-T) is examined as a modern solution for enhancing data exchange between businesses and tax authorities. This XML format enables tax officials to access comprehensive accounting information, facilitating tax audits and compliance checks. The integration of SAF-T with IFRS reporting is posited to improve data quality and operational efficiency while addressing the increasing demand for reliable accounting information. In conclusion, the article argues that the implementation of IFRS and SAF-T can significantly enhance financial transparency and comparability, thereby reducing risks and costs associated with investment evaluations in the global market. However, it also acknowledges potential challenges in managing accounting practices and the need for advanced measures to accurately reflect a company's financial status and performance. This comprehensive analysis underscores the importance of high-quality accounting data in navigating the complexities of modern tax relations

Assuring the chairperson’s statement in the integrated report

The study aimed to design the auditing framework for the audit of the chairperson’s statement. The chairperson’s statement is one of the most read narrative disclosure statements in the integrated report. Non-financial information has become twice as important as financial information yet, it is not required by the International Financial Reporting Standard (IFRS). The chairperson’s statement is not audited and this leads to the use of impression management tactics. This study answers the call from different scholars who have called upon the audit of the chairperson’s statement to curve the use of impression management tactics. The mixed method is used for data analysis. Perception of external auditors is sought through the Likert scale and interviews to ensure triangulation. Descriptive statistics, correlation, and thematic analysis are used to analyze the data. The study found that auditors are aware of the existing concern about the use of impression management in the chairperson’s statement. In this regard, an audit of the chairperson’s statement is deemed appropriate and long overdue. External auditors are the most suitable experts to audit the chairperson’s statement and issue reasonable assurance. Secondly, auditors believe that the reliability of the chairperson’s statement is crucial and to ensure credibility, the company must have strong internal control, and report accurate and complete information in the chairperson’s statement. The auditing framework is designed and shown through an integrative conceptual model. The results are consistent with previous studies that emphasise the need for the assurance of non-financial information in the integrated report. This study triggers debates amongst accounting firms, standard setters, and policymakers on the adoption of the auditing framework for the chairperson’s statement to give assurance to the users. The study contributes to the body of knowledge with an auditing framework to audit the chairperson’s statement, the first of its kind. Lastly, the study adds to the developing debate on the assurance of narrative disclosure parts of the integrated report.

COMPARATIVE STUDY ON AAOIFI FAS 1 AND IAS 1 AND EXPLORING THE COMPLIANCE OF AAOIFI FAS 1 FOR ISLAMIC FINANCIAL INSTITUTIONS (IFIS) IN BRUNEI AND UNITED ARAB EMIRATES (UAE)

This paper has two main objectives. First, it aims to compare the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Financial Accounting Standard 1 (FAS 1) with International Accounting Standard 1 (IAS 1). Second, it seeks to assess the level of compliance of Islamic Financial Institutions (IFIs) in the United Arab Emirates (UAE) and Brunei with the AAOIFI standard on General Presentation and Disclosures (FAS 1). To achieve these goals, the author conducted a content assessment of annual reports from selected financial institutions, using checklists designed for the AAOIFI standard on General Presentation and Disclosures. The study found that UAE IFIs displayed greater compliance with AAOIFI FAS 1 compared to their counterparts in Brunei. In 2021, Emirates National Bank of Dubai (Emirates NBD) achieved a compliance rate of 74.3%, while BIBD recorded a lower compliance rate of 70.8%. In summary, this paper sheds light on the differences between AAOIFI FAS 1 and IAS 1, offering valuable insights into compliance levels among IFIs in the UAE and Brunei. However, it acknowledges certain limitations, such as limited generalizability, reliance on secondary data, subjective content analysis, absence of primary research, evolving regulatory frameworks, and resource constraints. Overall, this research contributes to the field of Islamic accounting by employing content analysis techniques to compare AAOIFI FAS 1 and IAS 1 and assess compliance in IFIs in Brunei and the UAE. It aligns with previous studies on International Financial Reporting Standards for IFIs and aims to advance the understanding of Islamic accounting and financial reporting practices.

What effect does the mandatory adoption of IFRS have on the decision to withdraw an IPO?

ABSTRACT This article fills a gap in accounting disclosure discipline and Initial Public Offerings (IPOs) withdrawal research by examining how mandating IFRS affects IPO withdrawal. This study is the first to examine more than 33,000 worldwide IPOs that were either unsuccessful or successful from 1995 to 2019 in a variety of countries with varying legislative, cultural, and economic environments. We discovered solid evidence that International Financial Reporting Standards (IFRS) standards reduced IPO withdrawal rates. Mandating IFRS before an IPO reduces information asymmetry and reduces the risk of IPO withdrawal for IPO founders. This suggests that mandatory IFRS adoption reduces IPO withdrawals due to many variables. Reduced IPO information asymmetry improves transparency, investor trust, market efficiency, comparability, and liquidity, outweighing any drawbacks. New firms, investors, scholars, and legislators could capitalize on the results of our research.

A panel data analysis of the effect of audit quality on financial statement fraud

PurposeFinancial statement fraud has become a global concern, and auditors are increasingly focused on identifying and investigating it. Auditors may play a crucial role in investigating and reducing financial statement fraud, and this is particularly important in developing countries where fraudulent practices are more prevalent due to the lack of strict regulations and oversight. This study investigates whether enhanced audit quality has an impact on reducing financial statement fraud. The primary aim is to recognize whether a higher level of audit quality relates with a decrease in fraudulent activities in Indonesia, which is one such country that has not yet adopted IFRS.Design/methodology/approachThis study investigates the effect of audit quality, as measured by audit tenure, audit fee, and audit size, on the dependent variable of financial statement fraud, as indicated by Dechow F-value. The sample for this study comprises 951 observations from 2015 to 2020, and the research design utilizes a panel data approach. To test the main hypothesis, OLS, and GMM estimation techniques are employed.FindingsThe analyses reveal a negative relationship between audit tenure and financial statement fraud. This suggests that shorter audit tenure may be associated with an increased risk of financial statement fraud. This heightened risk could stem from auditors having limited time to thoroughly understand the company's operations and internal controls, potentially making it more challenging to detect and prevent fraudulent activities perpetrated by the client. Conversely, a positive relationship is identified between audit fees and financial statement fraud, suggesting that companies paying higher fees may be engaging auditors less adept at detecting fraudulent activities. Furthermore, a negative relationship is observed between Big-5 and financial statement fraud, which may be due to the greater resources, expertise, quality control, scrutiny, reputation, and ethical conduct of Big-5 audit companies.Research limitations/implicationsThis study only focused on listed companies in Indonesia, therefore, caution should be exercised when generalizing the findings to other developing and Muslim countries such as Malaysia. The findings may differ due to the adoption of IFRS in Malaysia. As such, it is important for future studies to include Malaysia as a sample and compare the results with those of Indonesia. This comparison would demonstrate the impact of IFRS adoption on the relationship between audit quality and financial statement fraud and provide insights for policy makers in Indonesia.Practical implicationsThe findings of this study have important implications for developing countries that have been shown to be more susceptible to fraud than developed countries. This study contributes to the existing research on the role of audit quality in reducing financial statement fraud and emphasizes the need for auditors and accountants to take a proactive approach in detecting and investigating financial fraud.Originality/valueThis study is a new study because it investigates the relationship between audit quality and financial statement fraud in Indonesia, a developing Muslim country that has not yet adopted International Financial Reporting Standards (IFRS). The study provides valuable evidence on the unique factors that influence fraud in Indonesia and fills a gap in the literature as previous studies on this topic have largely focused on developed countries. Additionally, the study recommends that policymakers in Indonesia consider implementing IFRS to improve the reliability of financial reporting and strengthen the effectiveness of the auditing process, thus reducing the incidence of fraud.