Does Mandatory Ifrs Adoption Improve Information Quality For Low Investor Protection Countries? Essay

Despite those enormous advantages, it has been argued that IFRSS adoption lead to significant costs. The main argument is that IFRSs do not consider local needs and priorities as every country has their own ‘business environment, legal systems, cultures, language and political environment’ (Henderson and Peirson, 2000 cited from Malthus, S., 2004). However, to overcome this problem, IASB can accommodate flexible reporting standards that enable companies to choose alternatives that are more suitable for their external condition. It is opinion of some opponents of IFRS adoption that IAS is ‘insufficiently detailed’ (Uddin,M.S., 2005, p.4) that require accountants’ and auditor’ professional judgment. However, overly detail might be contra productive and not flexible in anticipating every changes and differences.

Access to capital markets in United Kingdom is easy after the adoption of IFRs. Public capital markets play an important role in financing the activities of non-financial companies in the United Kingdom, providing them with the main option to bank loans and private sources of finance. These set of international accounting standards helped reduce the information processing and auditing costs to the UK’s market participants. With the help of adoption of IFRS it is expected to lower information costs to capital markets, and the UK

In the report, the Staff points out six dominant issues, which arise with the Work Plan. Firstly, in order to converging IFRS effectively into the U.S. Financial Reporting System, the Staff, based on observations, indicates that IFRS needs adequate improvement on enhancing transparency of financial statements and reducing diversity during application process, which can greatly fulfill comparability of financial statements. Secondly, although the standard setting process of IFRS is commented as independent by most of reviewers, the Staff presents that IASB should improve one of components, which is timeliness, while further boosting IFRS standard setting process. It means that IASB should take more attention to enhance its timely manner on addressing rising issues of standard setting in order to accomplish the needs of investors. Thirdly, according to the observations and comments, the Staff points out U.S. investors show more

In 2002 the European Union agreed that from January 2005 international accounting standards/international financial reporting standards (IASs/IFRSs) would apply for the consolidated accounts of the EU listed companies (Barth, Landsman, and Lang, 2008). Starting from 2005, IAS/IFRS adoption has been mandatory in all the member states of the European Union with the ultimate goal of increasing transparency in financial reporting. This adoption of IAS/IFRS therefore represents an extraordinary event for empirical research because evidence shows that the mandatory adoption of IAS/IFRS in Europe results in better quality of financial reporting. In fact, empirical studies provide some support to the notion that adopting IAS/IFRS improves the quality of financial reporting and of public information (Palea, 2013).

Accounting forms the overall backbone of the financial world. Financial markets are predicated on consumer and user confidence. Without confidence, consumers attempting to make financial decisions will be doing so using inaccurate and incomplete information. The lack of transparency regarding the truthfulness of reported numbers creates uncertainty within the capital markets. This uncertainty regarding the accuracy of information ultimately undermines the overall financial system, causing harm to society in the process. Investors will require higher rates of return, individuals will become unlikely to invest, and innovation could become stifled, harming the quality of life for society overall. Accounting standards, particularly those from the IFRS, are required to help maintain confidence in the reliability of reported financial performance. These standards, such as IFRS 8, are often amended to reflect the economic realities of business transactions. These changes, although well intended, may often have unintended consequence. This is particularly true for IFRS 8 Operating Segments, which has been heavily criticized by pundits and practitioners alike (Ashish, 2010).

As Indian economy is gradually attuned to the global best practices, the country is slated to converge the Indian Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS) from 01.04.2011 The Banking and Insurance sectors are excluded from this cut off time period and the convergence activities are ongoing. There is need for convergence of RBI guidelines also with IFRS. As it has significant impact on financial position and performance of banks, this study has highlighted the concept of IFRS in general and Banks in particular. It discusses on the impact, gaps and issues relevant to

This article introduces the International Financial Reporting System (IFRS) rules and practices, to the Czech Republic. The IFRS is a financial reporting system was established in an attempt to maintain stability throughout the financial community. Despite the conflicts with other countries’ accounting systems, the IFRS attempts to organize one financial standard system for businesses to report their financial statements. This article examines the relationship between domestic and global standards of accounting. The concept of developing a modern accounting standard in the Czech Republic, implies that most companies in that country are not willing to change their accounting standards.

Financial reporting is a branch of accounting which involves presenting the financial information of a company to the stakeholders so that they can be in a position to evaluate its financial performance and make an informed decision based on the information. There are two general sets of standards governing financial reporting in the major economies across the world. They include the International Financial Reporting Standards (IFRS) regulated by the International Accounting Standards Board (IASB) and the United States Generally Accepted Accounting Principles (US GAAP) governed by the Financial Accounting Standards Board (FASB). The following academic paper seeks to analyze the debate that has been ongoing on whether the US limited companies should adopt the use of IFRS in their financial reporting as proposed by the Securities and Exchange Commission (SEC) in August 2008.

By adopting IFRS it is expected that the investors and other users of financial statements will be beneficial, by lowering the costs of comparing alternative investments and increasing the quality of information. Investors are ready to invest in the company so company are also getting benefit from IFRS. The company who is involved more in foreign activities will be more beneficial by switching to IFRS. However, Ray j Ball has criticised about overall cost of the international standard. He argues that the implemented of the standards could be careless, and the regional difference in accounting could become hidden behind a label. He is also concerns that fair value important of IFRS and the impact of accountants from non-common law regions, where damages have been recognized in a less timely manner.

In this essay we discuss the development and adoption of the International Financial Reporting Standards (IFRS) in the Republic of Bulgaria. Most of the characteristics and features apply not only to this country, but also to most developing economies in Europe. The IFRS are a set of standards which imply rules, methods and governance for reporting and interpreting financial data. The purpose of the IFRS is to develop a set of universal standards to be applied and comprehended worldwide, in order to achieve harmonization and standardization among reporting entities.

By putting foreign countries for an example, according to Kilic, Uyar and Ataman (2014) Small and Medium-sized Entities (SMEs) in Turkey are greatly advantaged by the early adoption of IFRS. Moreover, Turkey translates the IFRS into Turkish to support SMEs in practicing IFRS.Furthermore, SMEs are put on the same level with large entities in the nature of financial statements. Hence, professional traders can 't take advantage from the SME 's due to the same level of simple understandings of the IFRS. (Jordan, 2013) This will significantly increase the attraction of economic growth as it increases opportunities and expansions of SMEs to develop further in Indonesia. The number of SMEs in Indonesia were recorded as 99.98% out of the total number enterprises in country supports for the change positively. (Rahman, 2004)Another perk of adopting the IFRS is the significant increase of consistency and transparency of financial reporting. According to Radebaugh et al. (1995, A German firm Daimler-Benz constructed a financial report by using U.S. GAAP that supposed to be recorded on New York Stock Exchange (NYSE). The organisation highlighted $2.45 billion in hidden reserve as it was allowed under German accounting standard. Different guidelines have made the company to expose itself to multiple reporting in foreign stock exchanges costs and benefits, leading to inconsistent reports. Further, the increase in transparency also enhance the ability of an organisation to

IFRS also assist investors in making informed financial decisions and predictions of entity’s future financial performance and give a signal of higher quality accounting and transparency. Therefore, IFRS would tend to reduce earnings manipulation, enhance stock market efficiency and positively impact on entity’s’ stock returns and stock related financial performance measures.

Esptein (2009), emphasized the fact that universal financial reporting standards will increase market liquidity, decrease transaction costs for investors, lower cost of capital and facilitate international capital formation and flows, various studies conducted on the adoption of IFRS at country level indicated that countries that adopted IFRS experienced huge increases in direct foreign investment (DFI) flows across countries (Irvine and Lucas, 2006). Cai & Wong (2010),in a study of global capital markets demonstrated that capital markets of countries that had adopted IFRS recorded high degree of integration among them after their IFRS adoption compared with the period before adoption. In a study on financial data of public listed companies in 15 member states of the European Union (EU) before and after full adoption of IFRS in 2005, Chai at al (2010), found that majority of accounting quality indicators improved after IFRS adoption in the EU.

As the development of globalization in economics in recent years, there is increasing popularity of IFRS. Based on the research(Shima and Yang 2012), there are more than 100 countries adopting the IFRS for their accounting standards. As IFRS could bring about varies advantages in comparison with other accounting standard. For Indonesian, there are three main factors encouraging it to adopt IFRS in terms of focusing on investors, transparency and comparability.

Tyrrall, Woodward, and Rakhimbekova (2007) emphasize several advantages with the IFRS adoption: 1) enlarge status and quality of financial reports, 2) setup costs related to development of local standards get eliminated or reduced, 3) increased efficiency in national and international markets due to more understandable,