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.

Revenue-expense versus asset-liability model

2020 ◽  
Vol 28 (2) ◽  
pp. 277-310
Author(s):  
Nicola Moscariello ◽  
Fabio La Rosa ◽  
Francesca Bernini ◽  
Pietro Fera
Keyword(s):  
Financial Reporting ◽  
Private Firms ◽  
Earnings Persistence ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Earnings Attributes ◽  
Country Analysis ◽  
Accounting Model ◽  
The Impact

Purpose The purpose of this study is to analyse the impact of two different financial reporting models (revenue-expense vs asset-liability) on several earnings attributes. Design/methodology/approach The analysis compares the earnings attributes of non-financial private firms using the Italian generally accepted accounting principles (Italian GAAP, based on a revenue-expense model) with those of the Italian non-financial private firms voluntarily adopting the international financial reporting standards (IFRS, based on the asset-liability model). To address major methodological concerns, the research design is based on a single-country analysis and on three different samples as follows: firms voluntarily adopting IFRS; a matched sample of Italian GAAP firms; Italian GAAP firms belonging to the Elite programme, and therefore, comparable to the IFRS adopters in terms of incentives towards financial reporting transparency. Findings The results show that firms reporting under a revenue-expense model are characterized by a stronger revenue-expense matching degree, along with higher earnings’ persistence, earnings’ predictability and conditional conservatism than firms adopting an asset-liability model. In addition, contrary to the expectations, Italian GAAP firms do not present smoother earnings and do not report greater abnormal accruals than IFRS adopters do. Overall, the findings suggest that the switch from a revenue-expense model to an asset-liability model negatively affects several earnings attributes of non-financial private companies, shedding new light on the drawbacks associated with the adoption of the IFRS accounting model. Originality/value This study addresses a theme characterized by sparse research efforts, adding new insights to the debate on the decline in the quality of earnings and on the drawbacks associated with the adoption of the IFRS accounting model.

scholarly journals The importance of information upon applying IFRS in financial entities that trade at the Colombian stock market

2019 ◽  
Vol 21 (34) ◽  
pp. 137-152
Author(s):  
Miguel Angel Laverde Sarmiento ◽  
Jorge Fernando Garcia Carrillo ◽  
Juan Carlos Lezama Palomino ◽  
Alejandra Patiño Jacinto
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Stock Exchange ◽  
Regulatory Framework ◽  
General Level ◽  
Market Exchange ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Before And After ◽  
The Impact

The aim of this research is to determine whether the implementation of the International Financial Reporting Standards (IFRS) in the companies of the financial sector listed on the Colombian Stock Exchange has greater relevance compared to the previous accounting regulatory framework known as Generally Accepted Accounting Principles (GAAP) in Colombia, for the years 2009 to 2016. Taking into account the concept of valorative relevance that indicates that the accounting information is relevant if it affects the stock price reflected in the capital market exchange. To determine this relationship, an adaptation of the model proposed by Ohlson (1995) is used, because it is the most frequently used to measure relevance. The modifications made to the model were to include accounting variables of financial instruments of assets and liabilities to better measure the impact of the IFRS. On a general level, the conclusion is reached that the valorative relevance of financial companies listed on the stock exchange between 2009 and 2016, does not change due to the application of the IFRS. The results are because the regulation that financial companies that are listed on the stock exchange of Colombia are subject to has contributed to the relevance being maintained before and after the application of the new regulatory framework. however, when carrying out the study of the information taking into account only the variables and taking into account the regulations under the IFRS, they present a greater degree of significance.

Credit relevance after mandatory IFRS adoption in deposit money banks of Nigeria

2020 ◽  
Vol 5 (1) ◽  
pp. 47-61
Author(s):  
Dagwom Yohanna Dang ◽  
James Ayuba Akwe ◽  
Salisu Balago Garba
Keyword(s):  
Financial Reporting ◽  
Credit Rating ◽  
Financial Reports ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Secondary Sources ◽  
Ifrs Adoption ◽  
Regulatory Authorities ◽  
Significant Difference

PurposeCredit relevance of financial reporting can be influenced by change in financial reporting framework. This study aims to examine the effect of mandatory international financial reporting standards (IFRS) adoption on credit relevance quality of financial reporting of deposit money banks (DMBs) in Nigeria.Design/methodology/approachThis study uses difference-in-differences (D-in-D) design for its modelling. Panel data regression analysis based on the D-in-D model is used in analysing the data collected from secondary sources.FindingsThe findings of this study are that based on the D-in-D approach, there is a significant and positive effect of mandatory IFRS adoption on credit relevance quality of financial reporting of DMBs in Nigeria, and that there is also a significant difference in the credit relevance quality of financial reporting of mandatory adopting banks in the post-mandatory IFRS adoption period compared to pre-mandatory IFRS adoption period.Research limitations/implicationsTo the best of this study's review, there is inadequacy of literature within the credit relevance research in Nigeria. In the light of this, this study intends to fill the gap.Practical implicationsThis study is specifically important to regulatory authorities, both primary and secondary regulators. Specifically, this study has implications in the regulatory roles of Central Bank of Nigeria (CBN) and Financial Reporting Council of Nigeria (FRC). However, the study recommends that regulatory authorities should encourage DMBs to avail their financial reports annually to credit rating agencies (local and international) for proper evaluation for subsequent ratings.Originality/valueThe peculiarities in this study, that is the utilisation of the D-in-D design and the use of credit relevance metric as the dependent variable, made this study important and novel to push the frontier of existing knowledge.

Using arguments and myths to lobby over controversial accounting issues: evidence from Japan

2020 ◽  
Vol 32 (3) ◽  
pp. 355-390
Author(s):  
Noriyuki Tsunogaya ◽  
Andreas Hellmann
Keyword(s):  
Financial Reporting ◽  
Financial Services ◽  
Accounting Standards ◽  
Fair Value ◽  
Network Effect ◽  
International Accounting Standards ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Stakeholder Groups

Purpose This study aims to examine the (overt) arguments and (covert) myths the Business Accounting Council (BAC) members have used to lobby over controversial accounting issues, such as the application of fair value accounting (FVA) and the adoption of International Financial Reporting Standards (IFRS) in Japan. Design/methodology/approach The authors used a content analysis to examine 85 statements included in multiperiod BAC meeting minutes and 68 articles prepared by International Accounting Standards Board (IASB) representatives from Japan. Findings The results reveal that together with the arguments, myths were created and amplified by opponents of FVA and the Financial Services Agency to hide the latter’s strong regulatory power. They created these myths, using covert stories of the importance of manufacturing activities and tax accounting (for small- and medium-sized enterprises [SMEs]), to oppose mandatory IFRS adoption in Japan and, thus, to maintain vested rights in preparing the Japanese generally accepted accounting principles and Japanese accounting standards for SMEs. Originality/value First, this study contributes to the lobbying literature by focusing on the coalition (network) effect of influential stakeholder groups. Second, although lobbying activities have been investigated mostly using comment letters, this study reviews multiperiod BAC meeting minutes and articles prepared by IASB representatives from Japan. Third, the study examines both overt arguments and covert myths, both of which are important in unmasking the fundamental structures of power within influential organizations, such as government agencies and standard-setters.

Better with age: financial reporting quality in family firms

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Roberto Tommasetti ◽  
Marcelo Á. da Silva Macedo ◽  
Frederico A. Azevedo de Carvalho ◽  
Sergio Barile
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Reporting Quality ◽  
Management Control ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Family Control ◽  
A Value ◽  
The Family ◽  
The Impact

Purpose The purpose of this paper is to contribute to the literature on financial reporting quality (FRQ) within family firms (FFs), assessing whether longevity can determine a different propensity to earning management (EM) behaviors. Design/methodology/approach The sample, composed by Italian and Brazilian listed family (and non-family) firms, is segregated into old and young. For each subsample, unsigned discretionary accruals are calculated, using two different EM models. A linear regression model is then proposed, together with some robustness tests, to confirm the research hypothesis. Findings The outcome is that, within FFs, the entrenchment effect seems to be diminishing with the company’s age, up to become lower than the alignment effect. With some caveat, research also demonstrates that old FFs are more propense to supply higher FRQ than any other subsample group. Research limitations/implications The authors demonstrated that, in terms of EM decision process, FFs become virtuous just with time. More research is needed to evaluate the impact of the share and management control separately and to analyze different generation segmentation. Practical implications This paper could help non-family stakeholders, as it shows that different company types (family vs non-family), at a different stage of the life-cycle (young vs old) have a different attitude toward FRQ. On the other hand, family owners could exploit the longevity as a value driver. Originality/value This paper suggests that agency theory and socio-emotional theory are complementary in explaining the family control role in earnings management decisions. The study also contributes to the debate of FF homogeneity and on risk behavior in FFs, often portrayed as having a patient capital.

A Study of Impact of IFRS Convergence in India on Debt–Equity Components of Financial Statements

2020 ◽  
pp. 097215092091846
Author(s):  
Saumya Jain ◽  
Chandra Prakash Gupta
Keyword(s):  
Decision Making ◽  
Financial Reporting ◽  
Financial Statements ◽  
Annual Reports ◽  
Practical Relevance ◽  
Reporting Standards ◽  
Financial Instruments ◽  
Financial Reporting Standards ◽  
Significant Difference ◽  
The Impact

The present article analyses the impact of International Financial Reporting Standards (IFRS) convergence on financial statements in India. Our focus is on the most significant and challenging standard, that is, IND-AS (financial instruments). Our focus is on the most significant and challenging standard i.e IND-AS(Financial Instruments) and their impact on debt-equity classification brought about by the new standard(s). We analyse the annual reports of 30 listed entities having outstanding preference share capital for the years 2015–2016 and 2016–2017. We redefine the formulae of ratios most commonly used in loan agreements (popularly referred to as ‘debt covenants’) from lenders’ perspective and empirically examine the impact of IFRS convergence on the value of these ratios for the same financial year, that is, 2015–2016. Our results show that there is a significant difference in the value of ratios calculated using newly developed formulae and by applying the old formulae on new data. The study is the first of its kind to empirically examine the impact of IND-AS specifically standard relating to financial instruments on debt ratios in India. Our contribution to the literature is that we not only examine the impact on ratios on transition to IND-AS but also offer a solution as to how the users can mitigate this impact by making adjustments to the debt ratios taking into account the recognition, measurement and presentation changes brought about by IND-AS, so that they can apply our newly developed formulae directly on IND-AS statements and derive the same meaning and interpretation from the ratios as before retaining their practical usage. Thus, our study is of immediate practical relevance to lenders, credit managers and investors aiding their decision making.

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.

scholarly journals The impact of CEOs’ accounting backgrounds on earnings management and conservatism

2017 ◽  
Vol 10 (1) ◽  
pp. 4-24
Author(s):  
Nan Hu ◽  
Rong Huang ◽  
Xu Li ◽  
Ling Liu
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Discretionary Accruals ◽  
Accounting Conservatism ◽  
Policy Implications ◽  
Good News ◽  
Content Type ◽  
Accounting Research ◽  
Significant Difference ◽  
The Impact

Purpose Existing literature in experimental accounting research suggests that accounting professionals and people with accounting backgrounds tend to have a lower level of moral reasoning and ethical development. Motivated by these findings, this paper aims to examine whether chief executive officers (CEOs) with accounting backgrounds have an impact on firms’ earnings management behavior and the level of accounting conservatism. Design/methodology/approach The authors classify CEOs into those with and without accounting backgrounds using BoardEx data. Using discretionary accruals from several different models, they do not find that CEOs with accounting backgrounds are more likely to engage in income-increasing accruals. However, the authors find that CEOs with accounting backgrounds exhibit lower levels of conservatism, proxied by C-scores and T-scores (Basu, 1997). This finding suggests that CEOs with accounting backgrounds recognize bad news more quickly than good news, consistent with the accounting principle of “anticipating all losses but anticipating no gains”. Findings The authors show that firms whose CEOs have accounting backgrounds exhibit lower levels of accounting conservatism. However, these firms do not exhibit higher levels of income-increasing discretionary accruals. This study documents the impact of CEOs’ educational backgrounds on firms’ accounting choices and confirms prior findings in experimental accounting research using large sample archival data. Originality/value This paper is the first study that investigates the impact of CEOs’ accounting backgrounds on firms’ financial reporting policy. The findings may have some policy implications. If accounting backgrounds of CEOs can make a significant difference on firms’ behavior, it is reasonable to make CEOs accountable for the quality of financial reporting. This paper is one of the first to empirically test inferences drawn by experimental accounting research. There has been a gap between archival and experimental accounting studies. The authors propose that interesting research questions can be addressed by filling in such a gap.

The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence from Australia

2012 ◽  
Vol 11 (1) ◽  
pp. 119-146 ◽  
Author(s):  
Yi Lin Chua ◽  
Chee Seng Cheong ◽  
Graeme Gould
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Quality ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Financial Firms ◽  
Wide Range ◽  
Mandatory Adoption ◽  
The Impact

ABSTRACT Following the mandatory implementation of International Financial Reporting Standards (IFRS) in Australia as of January 1, 2005, this study examines its impact on accounting quality by focusing on three perspectives: (1) earnings management, (2) timely loss recognition, and (3) value relevance. Using four years of adoption experience since the mandate was first made effective in Australia for a wide range of accounting-based metrics and market-based information, we find that the mandatory adoption of IFRS has resulted in better accounting quality than previously under Australian generally accepted accounting principles (GAAP). In particular, the findings indicate that the pervasiveness of earnings management by way of smoothing has reduced, while the timeliness of loss recognition has improved post-adoption. Additionally, the value relevance of financial statement information has improved, especially for non-financial firms. This is despite the fact that there is evidence to suggest that financial firms are engaged in managing earnings toward a small positive target after the mandatory adoption of IFRS in Australia.

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