scholarly journals Libya’s IAS/IFRS Adoption and Accounting Quality: What Lessons from the European Union Experience

2014 ◽  
Vol 4 (1) ◽  
pp. 118 ◽  
Author(s):  
Najeb Masoud
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Accounting Information ◽  
Financial Accounting ◽  
Future Research ◽  
The European Union ◽  
Accounting Quality ◽  
Ifrs Adoption ◽  
Accounting Reports

This study provides a review of the literature on adoption of IAS/IFRS in Libya, the time the IFRS standards decision is made in EU countries and the time IAS/IFRS adoption becomes undertaking in Libyan economy. The adoption of IAS/IFRS in Europe on the quality of financial reporting is an example of accounting standardisation among countries with different institutional frameworks and implementation rules. Impacts of this adoption in Libya will gain many benefit include the improve quality of financial reporting, less earnings management, more comparability, and provide more reliable, accurate, transparency, and high relevance for stock price determination of financial accounting information. These findings could be fruitful and helpful for outside users of accounting reports and also for regulators and legislators in their attempts to constrain the incidence of earnings accounting practises and to enhance the quality of accounting information. To explore the relevance (applicability) of international accounting standards to developing countries such as Libya is a topic of significant interest amongst disclosure (non-accounting information) users. This is a key subject for standard setting purposes as IAS/IFRS have been adopted in many different nations all over the world, and many others are likely to adopt them in the near future (including, Libya). Finally the main limitations of this study are outlined and opportunities for future research are discussed, particularly in relation to this study’s findings about the requirement to reconsider the usefulness of the relationship between accounting practices and framework adoption of IAS/IFRS in Libya.

Does the Mandatory Adoption of IFRS Improve the Association between Accruals and Cash Flows? Evidence from Accounting Estimates

2018 ◽  
Vol 33 (1) ◽  
pp. 39-59
Author(s):  
Jimmy F. Downes ◽  
Tony Kang ◽  
Sohyung Kim ◽  
Cheol Lee
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
Data Availability ◽  
The European Union ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Accounting Estimates ◽  
Accounting Accruals ◽  
Future Cash Flows

SYNOPSIS We investigate the effect of mandatory International Financial Reporting Standards (IFRS) adoption in the European Union on the association between accounting estimates and future cash flows, a key concept of accounting quality within the International Accounting Standard Board conceptual framework. We find that the predictive value of accounting estimates improves after IFRS adoption. This improvement is largely driven by specific types of accounting estimates, such as accounts receivable, depreciation, and amortization expense. We also find that the improvement is concentrated in countries with larger differences between pre-IFRS domestic GAAP and IFRS. Our findings suggest that IFRS allow managers to exercise their judgment to provide information about future cash flows through the more subjective/judgmental portion of accounting accruals. JEL Classifications: M16; M49; O52. Data Availability: The data used in this study are from public sources identified in the study.

Spillover effect of regulatory accounting inspections on accounting quality of peer companies

2020 ◽  
Vol 35 (5) ◽  
pp. 685-704
Author(s):  
Eunjung Cho ◽  
Jeehong Kim ◽  
Sooin Kim
Keyword(s):  
Financial Reporting ◽  
Spillover Effect ◽  
Discretionary Accruals ◽  
Least Square ◽  
Disciplinary Action ◽  
Future Research ◽  
Accounting Quality ◽  
Content Type ◽  
Negative Results

Purpose The purpose of this paper is to examine whether a negative outcome (i.e. a sanction) of an inspection by Korea’s Financial Supervisory Service for an industry-leading company affects the accounting quality of other companies in the same industry. The premise is that when peer companies observe the negative results of such an inspection on a leader in their industry, they will be more concerned about their own risk during a future inspection and more likely to increase their accounting quality. Design/methodology/approach The authors conduct a mutivariate Oridnary Least Squares (OLS) regression using 11,476 South Korean samples from 2002 to 2016. The study uses ordinary least square regressions to test the hypotheses using discretionary accruals as a proxy for accounting quality. Findings The authors find that peer companies reduced their discretionary accruals in the next period and that this reduction is amplified according to the severity of the disciplinary action on the industry leader and the materiality of errors in that leader’s financial statements. Originality/value This finding contributes to the literature by providing the first evidence of a spillover effect of regulatory inspection on accounting quality that financial reporting sanctions not only affect the overall accounting quality of the sanctioned company but also that of its peers in the same industry. The authors expect this study to lead to future research on the effect of other regulations on industry-wide accounting quality.

A Classroom Exercise on Unconscious Bias in Financial Reporting and Auditing

2008 ◽  
Vol 23 (2) ◽  
pp. 229-245 ◽  
Author(s):  
Scott J. Boylan
Keyword(s):  
Short Duration ◽  
Financial Reporting ◽  
Financial Accounting ◽  
Accounting Quality ◽  
Unconscious Bias ◽  
Instructional Resource ◽  
Behavioral Biases ◽  
Classroom Exercise

In this instructional resource, I describe a classroom exercise in which students witness their own behavioral biases as they arise endogenously within a financial reporting and auditing setting. Students use data from the exercise to identify evidence of unconscious biases in their judgments, to differentiate between unconscious biases in judgment and biases attributable to deliberate gamesmanship, and to consider the importance of making such a distinction. The exercise contributes to accounting and auditing education by illustrating a provocative argument made by Bazerman et al. (1997), that the quality of financial reporting and auditing is affected by unconscious biases in judgment. In addition to identifying biases, students use insights from the exercise as a platform for exploring issues pertaining to the quality of auditing and financial reporting at a deeper level than would otherwise be possible. In light of its short duration (about 30 minutes) and ease of implementation, the exercise is well suited for auditing and financial accounting classes, where topics pertaining to financial reporting and accounting quality are of interest.

scholarly journals The Role of IFRS on Financial Reporting Quality and Global Convergence: A Conceptual Review

2019 ◽  
Vol 3 (1) ◽  
pp. 67
Author(s):  
Auwalu Musa
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Accounting Quality ◽  
Ifrs Adoption ◽  
The World ◽  
Timely Loss Recognition

This study examines the role of International Financial Reporting Standards on financial reporting quality and the global convergence. The IFRS adoption is already an issue of global relevance across countries of the world due to the quest for uniformity, reliability and comparability of financial statements of companies. The adoption of IFRS in Europe is an example of accounting quality across-borders with different institutional frameworks and enforcement rules. This allows investigating whether, and to what extent accounting regulation per se can affect the quality of financial reporting and leads to convergence in financial reporting. Specifically, the study review how the change in the recognition and measurement of firms operating accrual item, the loan loss provision, affects income smoothing behaviour and timely loss recognition. The study found that the IFRS convergence reduces the scope for earnings management, is related to more timely loss recognition and leads to more value relevant accounting measures. Thus, the study reviews background and guidance on the change in financial reporting quality following extensive IFRS adoption around the world countries. The study found that a difference in accounting quality is related to country’s overall infrastructure setting. The study also highlights the importance of investor protection for financial reporting quality and the need for regulators to design mechanisms that limit managers' earnings management practice. The study found from different literatures that the adoption of IFRS leads to higher quality of accounting numbers and improve foreign direct investment across countries.

scholarly journals CONSIDERATIONS ON THE TREATMENT OF QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION AT THE INTERNATIONAL LEVEL AND IN VARIOUS NATIONAL ACCOUNTING SYSTEMS

2014 ◽  
Author(s):  
Ionela Cristina Breahna Pravat
Keyword(s):  
Financial Reporting ◽  
Accounting Information ◽  
Accounting Standards ◽  
Quality Criteria ◽  
Financial Accounting ◽  
Financial Reports ◽  
Accounting Systems ◽  
Generally Accepted Accounting Principles ◽  
Accounting Reports ◽  
Qualitative Characteristics

The qualitative characteristics of accounting information presented by financial-accounting reports represent a concept which was subsequently introduced in the national legal accounting framework and, as a rule, the national conceptual frameworks represent the documents by means of which these quality criteria are established. At a worldwide level, there are more international or national organisms that have an important role in the elaboration of accounting standards in general and more specifically in the formulation of qualitative characteristics of financial reporting. We find two important ones among them, and these are: International Accounting Standards Board, which creates and promotes International Financial Reporting Standards (IFRS), and Financial Accounting Standards Board, which elaborates Generally Accepted Accounting Principles (US GAAP). However, at the level of each country a standardizing authority decides the rules for producing the financial reports and the qualitative characteristics that must be respected by the information contained in these documents. In this context, this paper aims to present a few general considerations concerning the treatment of the qualitative characteristics of the financial-accounting information in different accounting systems, such as the American one, or the British, French, German, Romanian ones, with insistence on the international approach to qualitative characteristics.

Assessing the Financial Reporting Consequences of Conversion to IFRS: The Case of Equity-Based Compensation

2010 ◽  
Vol 24 (4) ◽  
pp. 589-621 ◽  
Author(s):  
Mary Lea McAnally ◽  
Sean T. McGuire ◽  
Connie D. Weaver
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Intrinsic Value ◽  
Price Volatility ◽  
Fair Value ◽  
Cash Flows ◽  
Tax Benefits ◽  
The Difference ◽  
Accounting Reports

SYNOPSIS: The potential conversion of accounting standards from U.S. GAAP to International Financial Reporting Standards (IFRS) raises the issue of unknown financial reporting consequences. We consider one important accounting issue, namely equity-based compensation, and study how IFRS conversion will affect financial statements and the quality of reported numbers. The difference between the two standards is that IFRS reports tax benefits from equity-based compensation at their intrinsic value each period. This amounts to quasi fair-value accounting under IFRS compared to historic-cost accounting under GAAP. We develop and compare pro forma GAAP and IFRS accounting reports for a broad cross section of U.S. firms. We find that IFRS yields lower deferred tax assets and recognized tax benefits for approximately two-thirds of the option grants in our sample. Moreover, reported tax items will be more volatile under IFRS and these effects will be more pronounced for firms with greater option use and stock price volatility. Importantly, we find that IFRS tax items are better able to predict future cash flows. One conclusion is that IFRS improves the relevance, and thereby, the quality, of at least some reported numbers.

scholarly journals Dampak Adopsi International Financial Reporting Standards (IFRS) Terhadap Konservatisme Informasi Akuntansi pada Perusahaan di Indonesia

2018 ◽  
Vol 12 (2) ◽  
pp. 89-110
Author(s):  
Ratna Puji Astuti ◽  
Agus Kuntoro
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Control Variable ◽  
Accounting Information ◽  
Accounting Conservatism ◽  
Financial Accounting ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Ifrs Adoption

The objective in this study is to examine empirically changes in the level of conservatism of corporate accounting information in Indonesia as a result of the use of Financial Accounting Standards (IFRS) adopted by IFRS (International Financial Reporting Standards). Conservatism was measured using the Market-to-Book bias component model (Beaver and Ryan, 2000). This study uses the Financial Statement data from 178 companies, 2007 to 2016, listed on the Indonesia Stock Exchange. Using multiple regression models that place accounting conservatism as a dependent variable while IFRS adoption, managerial ownership, institutional ownership, and public ownership as independent variables, this study proves that IFRS adoption does not affect the level of conservatism of accounting information. The size of the firm (size) and the composition of debt (leverage) is a control variable that participates in controlling the model of this study. Keywords: IFRS adoption, conservatism of accounting information.

scholarly journals Does the IFRS Effect Continue? An International Comparison

2018 ◽  
Vol 10 (12) ◽  
pp. 4818 ◽  
Author(s):  
In Hwang ◽  
Kang Hur ◽  
Sun Kang
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Value Relevance ◽  
Investor Protection ◽  
Early Years ◽  
Accounting Quality ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Accounting Measurement ◽  
Early Effects

Previous research showed that in the early years after adoption, the change to International Financial Reporting Standards (IFRS) impacted accounting quality. The purpose of this study is to analyze whether those effects have changed over time in companies within countries that have different legal regimes, enforcement, and degrees of external investor protection. We measure accounting quality using discretionary accruals, real activities manipulation, and the stock price value relevance of earnings per share and book value per share. The findings show that the early effects of IFRS adoption continue with the passage of time in companies listed in countries with common law systems, such as the United Kingdom (UK) and Australia, which provide powerful outside investor protection in capital markets. Yet, the early effects of IFRS adoption do not continue after the passage of time in companies listed in Asian countries with statutory law systems, such as Korea and China, which have low levels of outside investor protection. Moreover, it is difficult to obtain evidence that value relevance has improved after the accounting measurement of corporate value shifted to IFRS. The results show that there are differences in the sustained effects on accounting quality, even after the application of IFRS due to the different social, economic, and cultural characteristics of countries.

IFRS and value relevance

2018 ◽  
Vol 19 (1) ◽  
pp. 60-80 ◽  
Author(s):  
Ahmed Kouki
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Stock Prices ◽  
Value Relevance ◽  
Accounting Information ◽  
Comparative Approach ◽  
The European Union ◽  
Content Type ◽  
Ifrs Adoption ◽  
Oriented System

Purpose The purpose of this paper is to compare the value relevance of accounting information between International Financial Reporting Standards (IFRS)-firms and non-IFRS-firms over five years before mandatory IFRS adoption from 2000 to 2004 and six years after IFRS adoption from 2006 to 2011. Design/methodology/approach The sample includes 1166 firm-year observations that cover firms from three Europeans countries. Different econometric tests, multivariate and panel regressions have been used to verify the hypotheses. Findings In the pre-IFRS period, voluntary IFRS adoption did not improve the value relevance of accounting information. The results indicate that the information contents of non-IFRS-firms in the post-adoption period have higher quality than in the pre-adoption period. The findings show a higher association between accounting information, stock prices and stock returns over both periods, however, the difference in results is not statistically significant. Research limitations/implications This study was not generalized to other stock exchanges that have a significant weight in the European Union, such as the FTSE 100 companies or the SP/MIB. Practical implications This study has some implications for standards setters, firms and practitioners. The transition to IFRS reduces the diversity of accounting systems and institutional conditions (capital market structure, Taxation systems). In addition, mandatory IFRS adoption engendered changes in firms’ business and organizational models that led accountants to improve their educational and training programs. Originality/value This paper contributes to the value relevance as well as IFRS literature by using a sample from code-law origin countries that switched from a debt-oriented system to shareholder-oriented system. It offers a comparative approach between IFRS-firms and Non-IFRS-firms in the pre- and post-adoption periods. In contrast, prior studies focused on the comparison during only one period. This empirical evidence should be of interest to investors and policymakers in other markets.

International Financial Reporting Standards, board governance, and accounting quality

2016 ◽  
Vol 24 (4) ◽  
pp. 474-497 ◽  
Author(s):  
Krismiaji ◽  
Y. Anni Aryani ◽  
Djoko Suhardjanto
Keyword(s):  
Financial Reporting ◽  
Information Quality ◽  
Accounting Information ◽  
Positive Association ◽  
Faithful Representation ◽  
Board Governance ◽  
Accounting Quality ◽  
Content Type ◽  
Ifrs Adoption ◽  
Accounting Information Quality

Purpose The purpose of this paper is to discuss empirical research examining the impact of International Financial Reporting Standard (IFRS) adoption and board governance on the accounting quality, in terms of relevance and faithful representation. Design/methodology/approach The research uses a sample of 454 observations of publicly listed companies on the Indonesian Stock Exchange for the fiscal year that ends on December 31, 2008 through 2011. Relevance is measured by predictive value, whereas faithful representation is measured by absolute discretionary accrual as an inverse measure. Board governance is measured by the board of commissioner score whereas IFRS adoption is measured by the percentage of IFRS adopted. The data used in this study are obtained both from Indonesian Capital Market Directory, Indonesian Stock Exchange database, and from company annual reports. Findings This research found evidence of a positive association of IFRS adoption on the relevance of accounting information quality. With respect to faithful representation, this study proves a positive association after IFRS adoption. This research also found that board governance has a positive impact on accounting information quality after IFRS adoption both in relevance and faithful representation. This result is in line with investor’s expectations that fair value IFRS adoption enhances the relevance of accounting information. Originality/value This study provides further evidence on the effect of IFRS adoption and board of governance on accounting information quality using data from Indonesia. Moreover, this study measures and tests both dimensions of earnings quality which are relevance and faithful representation and portrays a complete story about the quality of earnings. This study uses the qualitative characteristics of accounting information as proxies for accounting quality, so that it enriches the accounting literature about the role of accounting standards in financial reporting quality.

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