The Effect of International Financial Reporting Standards Adoption on Foreign Direct Investment and the Economy

This chapter examines the effect of International Financial Reporting Standards (IFRS) adoption on Foreign Direct Investment (FDI) and Ghanaian economy. It is a cross sectional survey study, with the population consisting of both Preparers and Users of financial statements. Stratified Random sampling method was adopted to gather primary data. Findings showed that IFRS has been adopted in Ghana and it is perceived that IFRS implementation promotes FDI inflows and economic growth. This study recommends all stakeholders to have full implementation to reap benefits of the IFRS and principle - based standards. The implication is that preparers need to work on their skills and expertise gap through training and development and to ensure that these standards are included in the academic and professional curricula. Moreover, regulatory bodies should monitor and enforce these standards but where local content is needed, convergence should be the solution.

Economic and Political Implications of IFRS Adoption in the Czech Republic

This chapter analyses the political and economic impact of IFRS adoption in the Czech Republic. It contributes to the current understanding of IFRS adoption from the perspective of a small European transitional market, where local accounting standards were previously well developed and still play a major role in financial reporting mainly, however for local taxation purposes. Although there has been an observable increase in the country's exports, FDI and international trade since the beginning of the 1990s, the direct impact of IFRS is difficult to discern, because of many political and institutional changes that have taken place concurrently. However, it is clear that adoption of IFRS has contributed to greater cultivation of the economic environment and facilitated international operations. IFRS adoption is not highly prevalent but is gradually increasing. This is apparent mainly in Czech companies with foreign parents that are in any event required to report in IFRS.

IFRS, Foreign Investment, and Prevailing Institutional Structure in Africa

We revisit the effectiveness of IFRS adoption for FDI attractiveness by considering the adopting country's institutional structure. Attention was on the extent of corruption control (as a measure of institutional structure). Data was tested on 42 African countries for the period 2001-2012. Using the Panel Corrected Standard Error (PSCE) estimation technique, our result suggest that the effect of IFRS adoption on foreign investment differs based on the level of corruption control instituted in the sample countries. When the variable – IFRS adoption, was tested for the sample with corruption control below the median value, the coefficient was either negative or insignificant. However, the opposite was seen for the category of countries with corruption control above the median value. This result was robust to the inclusion of alternative measures of corruption, foreign investment, and control of global financial crisis and legal origin of the country.

Determinants of and Obstacles to the Adoption of International Financial Reporting Standards in Africa

This chapter investigates the determinants of and obstacles to the adoption of International Financial Reporting Standards (IFRSs) in Africa. Specifically we investigate whether English as an official language, educational levels, existence of a capital market, economic openness and economic growth are associated with the probability of a country adopting IFRSs with a sample of 46 African countries. Binary logistics regression was used to analyze the data. The results suggest that only English as one of the official languages was associated with the likelihood of a country adopting IFRSs. Through an examination of the Reports on the Observance of Standards and Codes of the World Bank, we document that the major obstacles to adopting IFRSs are the lack of enabling legislation for its adoption and a lack of capacity in all aspects of the accounting supply chain. The chapter concludes that more research is needed at a continent level given that most of the determinants we investigated are not associated with the likelihood of a country adopting IFRSs.

Consequences of IFRS Adoption

The purpose of this chapter is to review the consequences of IFRS adoption by reviewing circumstances under which the benefits and costs accrue to firms, countries and the world. Notwithstanding, all issues raised about the consequences, IFRS adoption has had positive consequences and no wonder nearly 120 countries around the world and significant markets have adopted it. The chapter contributes to our understanding of the importance of IFRS and its effects and it is important to regulators and parties involved with world economic stability.

International Accounting Standards

This chapter aims, to highlight a review of IAS history, followed by approaches of accounting regulations. The development of accounting regulation within developing countries is also highlighted and discussed in the context of cultural diversity. It also aims to shed light into the motives that drive the adoption and implementation of IASs/IFRS. The political nature of lobbying and accounting standards setting process is also discussed in this chapter. In addition, the chapter discusses those factors that may be perceived as challenges which may delay or even block the convergence into the IASs/IFRS. Finally the authors provide key remarks about the IASs and venues for future research.

IFRS Adoption in the EU and the Challenge of Nomenclature Evidence from the UK, France, and Germany

Since the adoption of International Financial Reporting Standards (IFRS) and the subsequent directive by the European Union (EU), all companies operating in the EU are required to report their consolidated financial statements in line with the IFRS. This study examines the consolidated financial statements of the top 170 listed companies in three major EU stock exchanges (UK, France and Germany) and uncovered a disparity in the use of common nomenclatures. The findings reveal that the inconsistencies in the application of terminologies such as statement of financial position instead of balance sheet and sequence of arrangement of assets in order of liquidity constitute the main differences for entities operating in the three countries. Such differences pose an imminent challenge in the comparability and interpretation of financial results.

Adoption of International Financial Reporting Standards and the Changing Accounting Environment in Nigeria

The purpose of this chapter is to examine the major differences between Nigerian financial reporting rules and International Financial Reporting Standards (IFRS) following Nigeria's accounting reporting convergence to IFRS. The chapter documented evidence of differences between Nigerian Statement of Accounting Standards (NSAS), Companies and Allied Matters Act, 1990, Nigerian tax rules and IFRS requirements. It also discusses the IFRS adoption process in Nigeria and the benefits Nigeria stand to gain in adopting IFRS. The chapter discusses the challenges that might be encountered in the process of adoption of IFRS in Nigeria. Finally, the chapter provides recommendations through which these challenges can be addressed and suggest ways for further IFRS adoption research in Nigeria.

The Determinants and Financial Statement Effects of IFRS Adoption in Nigeria

The chapter examines the determinants and financial statement effect s of IFRS adoption in Nigeria. It also investigate into the impact of effect of the adoption of IFRS on accounting figures and ratios in the financial statements of 50 companies quoted in the Nigerian Stock Exchange. The determinants considered include firm's characteristics (firm size, operating cash flow, leverage, turnover, growth in turnover, profitability, liquidity and earnings quality) and corporate governance variables (board size, board independence and audit type). The data were obtained from the annual reports of companies listed in the Nigerian Stock Exchange between 2011 and 2013 and was analyzed using the ordinary least square (OLS) and logistic regression which were used to test for determinants of IFRS adoption while the independent t-test was used to examine the financial statement effects. With regard to the determinants, the empirical result indicates only profitability and earnings quality have significant but negative association with IFRS adoption. Moreover, IFRS adoption has significant effect on the return on equity.

Rational Asymmetric Development

A recent publication by the World Bank on Millennium Development Goals (MDGs) has established that extreme poverty has been decreasing in all regions of the world with the exception of sub-Saharan Africa (SSA), in spite of over two decades of growth resurgence. This chapter explores the role of transfer mispricing in SSA's extreme poverty tragedy. The analytical structure entails: (1) emphasis of rational asymmetric development as the dark side of transfer pricing; (2) linkages between financial reporting, international financial reporting standards (IFRS), transfer pricing and poverty; (3) evidence that the recent growth resurgence in African countries has been driven substantially by resource-rich countries which are experiencing high levels of exclusive growth and extreme poverty; (4) the practice of transfer mispricing by multinationals operating in resource-rich countries of SSA and (5) a Zambian case study of extreme poverty and transfer mispricing schemes by Glencore in the copper industry. While transfer mispricing is contributing to diminishing African growth, available evidence shows that the component of growth that is not captured by transfer mispricing does not trickle down to the poor because the African elite is also animated by practices of rational asymmetric development. Policy implications for the fight against extreme poverty are discussed.