Practical expedients and theoretical flaws: the IASB's legitimacy strategy during the COVID-19 pandemic

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nicola Moscariello ◽  
Michele Pizzo
Keyword(s):  
Financial Reporting ◽  
Deductive Reasoning ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Transition Costs ◽  
Ex Post ◽  
European Public ◽  
The Impact ◽  
Output Legitimacy ◽  
The Eu

PurposeGrounded in the legitimacy theory and framed within the context of European Union’s (EU's) endorsement process, this paper analyses the International Accounting Standards Board’s (IASB's) response to the COVID-19 crisis and the impact of its practical expedient COVID-19-Related Rent Concession on the IASB's output legitimacy.Design/methodology/approachThis study uses a qualitative process-tracing approach and combines inductive historical narratives and deductive reasoning to draw theoretical implications concerning the COVID-19 crisis' impact on the standard-setting process.FindingsThe paper shows a growing reliance on practical expedients in International Financial Reporting Standards (IFRS) to maintain the IASB's output legitimacy. While introducing some theoretical flaws, practical expedients increase the standards' flexibility and strengthen the IASB's ability to respond to the European political bodies' concerns. Indeed, an analysis of the IASB's response to the COVID-19 outbreak reveals the role practical expedients might play not only in reducing (ex ante) new IFRS transition costs but also in dealing (ex-post) with the broader economic impact of unexpected systemic crises to limit criticisms and controversies surrounding IFRS.Originality/valueThis study reveals a causal relationship between the rise of the European public good criterion in the EU endorsement process and the wider use of practical expedients in IFRS. An analysis of the latest amendment to IFRS 16 in response to the COVID-19 crisis also confirms the role of practical expedients in strengthening the acceptance of IFRS in an increasingly complex economic reality and sheds some light on the new strategies adopted by the IASB to preserve its legitimacy in the EU.

Factors influencing adoption of the international financial reporting standards (IFRS) in accounting education

2016 ◽  
Vol 9 (1) ◽  
pp. 2-16 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Teaching Practice ◽  
Teaching Experience ◽  
Accounting Education ◽  
Reporting Standards ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Departmental Support ◽  
Type Of Institution ◽  
The Impact

Purpose This paper aims to explore the challenges faced by accounting educators in their attempts to incorporate IFRS materials in their teaching and explores the impact of various factors (instructor’s attitude, size of accounting department, teaching load, type of institution, teaching experience and teaching materials) on the time spent on teaching IFRS materials in undergraduate accounting programmes. Design/methodology/approach A questionnaire survey was administered to faculty members working in Saudi Arabian universities, and interviews were held with a small number of such individuals in different universities in the Kingdom of Saudi Arabia. Findings The results indicate that the instructor’s attitude and availability of IFRS materials exert the most influence upon the time spent by teachers on the IFRS. They further find that departmental support, familiarity with IFRS, training and teaching experience in IFRS are positively associated with the time spent on teaching the IFRS. Originality/value The important implication is that accounting educators must adapt their teaching practice in light of the increasing adoption of the global financial reporting standards.

scholarly journals The extent of compliance with FRS 101 standard: Malaysian evidence

2017 ◽  
Vol 18 (1) ◽  
pp. 87-115 ◽  
Author(s):  
Azhar Abdul Rahman ◽  
Mohd Diah Hamdan
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Content Type ◽  
Corporate Compliance ◽  
Financial Reporting Standards ◽  
Compliance Level ◽  
Using Data ◽  
Analysis Models ◽  
The Impact

Purpose The purpose of this paper is to investigate Malaysian companies’ compliance with mandatory accounting standards. Specifically, this study examines the efficacy of agency-related mechanisms on the degree of compliance with Financial Reporting Standards (FRS) 101, Presentation of Financial Statements. It so proceeds by focussing on corporate governance parameters (board characteristics and ownership structure) and other firm characteristics. Design/methodology/approach Using data drawn from a sample of 105 Malaysian companies listed on the ACE market in 2009, the authors employ multiple regression analysis models to establish whether selected corporate governance and company-specific characteristics (proxying for agency-related mechanisms) are related to the degree of disclosure compliance. Findings The results indicate that the overall disclosure compliance is high (92.5 per cent). Furthermore, only firm size is positively associated with the degree of compliance. The other variables, those consisting of board independence, audit committee independence, CEO duality, the extent of outside blockholders’ ownership and leverage, do not show any significant relationship with the degree of compliance. Research limitations/implications This study focusses on only one accounting standard (FRS 101) that is mandatory in Malaysia. FRS 101 is both structured and rigid, leaving no room for companies to conceal any particular information. The sample of Malaysian companies selected is restricted to those listed only on the ACE market. As such, the results cannot be generalised to every company in Malaysia. Practical implications These results have important implications for policy makers because they suggest that whilst agency-related mechanisms may motivate compliance with mandatory standards, full compliance may be unattainable without regulations. Originality/value This is the only study in Malaysia to investigate the impact of regulatory requirements on corporate compliance level by companies listed on the new ACE market, which was introduced by the Bursa Malaysia in August 2009. This study contributes to the literature by examining the effects of both company-specific characteristics (such as company size, company age, liquidity, etc.) and corporate governance parameters on the degree of corporate compliance with mandatory disclosure, simultaneously, in contrast with prior studies which have examined them in isolation.

Regulating non-financial reporting: evidence from European firms’ environmental, social and governance disclosures and earnings risk

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Arif ◽  
Christohper Gan ◽  
Muhammad Nadeem
Keyword(s):  
Financial Reporting ◽  
Positive Impact ◽  
Content Type ◽  
Eu Directive ◽  
Before And After ◽  
The Difference ◽  
Earnings Risk ◽  
The Impact ◽  
The Eu

Purpose Motivated by the enactment of non-financial reporting regulations by the European Parliament, this paper aims to investigate the impact of European Union (EU) directive 2014/95/EU on the quantity of environmental, social and governance (ESG) disclosures by the S&P Europe 350 index firms. This study also investigates whether the implementation of the non-financial information (NFI) reporting regulations influences the association between ESG disclosures and firms’ earnings risk. Design/methodology/approach To measure the impact of mandatory regulations on the quantity of ESG disclosures, this study estimates the average treatment effects using a propensity weighted sample. Then this study uses the difference-in-differences method to estimate the differences in the association between ESG disclosures and earning risk before and after implementation of the EU directive. Findings The results show a significant positive impact of the EU directive on the quantity of ESG disclosures for the sample European public-interest entities, which indicates that the mandatory NFI reporting requirements could boost the availability of increasingly demanded ESG related information. The enhanced association between the ESG disclosures and firms’ earnings risk during the post-directive period reveals that mandating NFI reporting also increases the quality of ESG disclosures. Originality/value Using the legitimacy and decision-usefulness theories, this study provides novel evidence concerning the impact of the EU directive on the quantity and quality of ESG disclosures.

IFRS adoption and accounting conservatism in Latin America

2020 ◽  
Vol 33 (3/4) ◽  
pp. 301-320
Author(s):  
Harold Lopez ◽  
Mauricio Jara ◽  
Adriana Cabello
Keyword(s):  
Latin America ◽  
Latin American ◽  
Financial Reporting ◽  
Accounting Conservatism ◽  
Content Type ◽  
Listed Firms ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Mandatory Adoption ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of IFRS mandatory adoption on accounting conservatism and to shed light on the drivers of such impact. Design/methodology/approach Using a sample of listed firms for five Latin American countries, the authors analyze the relation between mandatory adoption of International Financial Reporting Standards and the conditional accounting conservatism of earnings. Findings The authors find evidence that IFRS adoption boosts earnings conservatism. This result is robust and heterogeneous. The results also show that the effect of IFRS differs across firms and countries. Specifically, the impact of IFRS adoption is higher for low-earnings-quality firms and for firms with high levels of investment opportunities. Practical implications The results suggest that IFRS adoption in Latin America has enhanced comparability of financial information both across and within countries. Originality/value This paper contributes to the literature by providing new evidence on the drivers of the impacts of IFRS adoption in emerging markets.

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

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vincent Konadu Tawiah
Keyword(s):  
Financial Reporting ◽  
Audit Fees ◽  
Content Type ◽  
Early Adopters ◽  
Financial Reporting Standards ◽  
One Year ◽  
The Cost ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose This study aims to examine whether the impact of international financial reporting standards (IFRS) on audit fees differs between early and late adopters. Design/methodology/approach The authors use robust econometric estimation on a sample of 314 firms from both early and late IFRS adopting countries. Findings The 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 implications The 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/value The 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 effect of culture on accounting conservatism during adoption of IFRS in the EU

2018 ◽  
Vol 26 (2) ◽  
pp. 311-330 ◽  
Author(s):  
Daniel Zeghal ◽  
Zouhour Lahmar
Keyword(s):  
Financial Reporting ◽  
Cultural Dimensions ◽  
Accounting Conservatism ◽  
International Standards ◽  
The European Union ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Conditional Conservatism ◽  
The Impact

Purpose This paper aims to examine the impact of culture on accounting conservatism during transition to international standards. Design/methodology/approach The sample used in this analysis consists of 15 countries of the European Union that have adopted International financial reporting standards (IFRS) pursuing Regulation N° 1606/2002. The study covers the 2000-2010 period. Two conservatism measures are used, the Basu (1997) measure to account for conditional conservatism and the accruals measure to account for unconditional conservatism. To test the impact of culture, the six dimensions of Hofstede (1980, 2010) are used. Findings The results of the analysis show that variation of conditional conservatism is influenced by the six cultural dimensions. However, unconditional conservatism is only affected by power distance. Originality/value The results of the study are interesting and provide a better understanding of the adoption of IFRS worldwide. The role of culture in explaining accounting practices after adopting a single set of accounting standards is particularly highlighted.

Consequences and determinants of IFRS convergence in India

2020 ◽  
Vol 28 (2) ◽  
pp. 303-322
Author(s):  
Vincent Tawiah ◽  
Pran Boolaky
Keyword(s):  
Capital Structure ◽  
Financial Reporting ◽  
Rational Analysis ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Family Control ◽  
Financial Reporting Standards ◽  
Significant Difference ◽  
The Impact

Purpose The purpose of this paper is to provide evidence of how convergence to International Financial Reporting Standards (IFRS) impacts accounting values and the determinants of variation in equity adjustments among Indian companies. Design/methodology/approach Using a sample of 323 listed companies, the authors empirically test whether there is a significant difference between converged IFRS (Ind.AS) and Indian Generally Accepted Accounting Principles (GAAP) (AS) reported figures and ratios and why companies adjust differently. Findings This paper reveals that fair valuation under Ind.AS causes a significant decrease in goodwill. A substantial decrease in both current and long-term liabilities because of non-recognition of proposed dividend, discounting of long-term provision per Ind.AS was also found. The variations in equity adjustment were significantly influenced by capital structure, level of family control and auditor type. Practical implications This paper provides insights to users who are interested in historical data, that Ind.AS brings significant changes in the accounting values and ratios and the impact differs among companies based on capital structure, ownership and auditor type. Originality/value This paper contributes to the literature of IFRS convergence in India by providing rational analysis of the differences between IFRS, Indian converged GAAP and Indian local GAAP among companies and its impact on accounting values.

scholarly journals The impact of international financial reporting standards on fund performance

2018 ◽  
Vol 31 (1) ◽  
pp. 102-120
Author(s):  
Dmitrij Rubanov ◽  
Matthias Nnadi
Keyword(s):  
Financial Reporting ◽  
Abnormal Returns ◽  
Policy Implications ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Efficient Market ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Investment Trusts ◽  
The Impact

Purpose The purpose of this paper is to examine the effect of international financial reporting standards (IFRS) on the performance of UK investment closed-end trust funds with domestic equity focus using Carhart’s Four-Factor model. Design/methodology/approach The paper is based on the Efficient Market Hypothesis, which argues that all available information is already included in the price of assets, and therefore, investors cannot beat the market or generate abnormal returns. Findings The results show that on average, UK investment trusts neither do generate abnormal returns, nor is their performance persistent. This paper provides empirical evidence to support the efficient market hypotheses and provides proof that the adoption of IFRS has, on average, a decreasing impact on the excess returns generated by UK investment trusts. Originality/value The findings of this paper have business policy implications for investment trust in the UK.

Content and context: “fair” values in China

2017 ◽  
Vol 30 (2) ◽  
pp. 352-377 ◽  
Author(s):  
Ferdinand Balfoort ◽  
Rachel Francis Baskerville ◽  
Rolf Uwe Fülbier
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
Governance Structure ◽  
Future Research ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Fair Value Measurement ◽  
Western Market ◽  
Value Measurement ◽  
The Impact

Purpose The evolution of International Financial Reporting Standards (IFRS) was nurtured by economists and accountants loyal to the philosophical basis of what is often referred to as “Western” market economies, being classical and neoclassical contracting theories. The purpose of this paper is to illustrate how a particular Asian cultural attribute (guānxì ) impacts on the efficacy of fair value measurement. Design/methodology/approach Using a literature review and research of studies of the adoption of IFRS in China, studies of both guānxì and fair value in Chinese accounting research, this study unbundles Williamson’s governance structure and contracting theory to examine how guānxì is positioned orthogonally to fair value (market-oriented valuation) principles for financial reporting. This is followed by a case study of the events surrounding the collapse of China Medical Technologies. Findings Guānxì is integral to Asian economies and economic transactions. Resulting conditions, characterised by relational contracting, may not meet the qualitative characteristics of neutrality and faithful representation in fair value measurement of assets and liabilities. The same may be true when insider or “trusted party transaction” values prevail for large ticket transactions among entities in any jurisdiction. Research limitations/implications Future research on the impact of guānxì may be constrained by its often hidden, and yet dynamic, character; and the varieties of its manifestations. Originality/value This study highlights how difficult it may be to achieve both comparability and relevance in the asset and liability recognition and measurement rules in Asian (and possibly also other) economies adopting accounting principles that are developed in a Western context.

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