Measurement of Formal Convergence of Vietnamese Accounting Standards with IFRS

Convergence refers to the process of narrowing the differences between International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) and country‐specific accounting standards. The purpose of this study is to measure the formal convergence between Vietnamese Accounting Standards (VAS) and IAS/IFRS using a fuzzy‐based approach. We assess the extent of convergence between VAS and IAS/IFRS from the perspective of a single standard, clusters of standards and the standards as a whole. The levels of standards convergence are clustered into four categories: full convergence, substantial convergence, substantial difference and complete difference. Our results indicate that the level of convergence between the two sets of standards only achieves mid‐level convergence. The findings of this study should help policy makers improve VAS to meet international standards.     

The impact of accounting standards convergence on Chinese firms’ overseas mergers and acquisitions

This paper investigates how accounting standards (AS) convergence influences Chinese firms’ overseas mergers and acquisitions (M&As) and shows that this convergence significantly promotes Chinese firms’ overseas M&As. Specifically, we find that both the probability of success and the value of transactions increases significantly in countries that implemented International Financial Reporting Standards (IFRS) prior to 2007. These results suggest that accounting standards (AS) convergence can improve the comparability of accounting information between China and other countries that have adopted IFRS. Moreover, we find that the impact of accounting standards (AS) convergence on state-owned enterprise (SOE) acquirers is weak. These findings demonstrate that accounting standards (AS) convergence can facilitate Chinese firms’ overseas M&As by improving the comparability of accounting information between China and target countries.     

Perceptions of accounting professionals in the adoption and implementation of a single set of global accounting standards: Evidence from Bahrain

In the quest for a single set of global accounting standards, the International Accounting Standard Board (IASB) continues to work with regulators in other countries toward adoption of IFRS. This study reports on an exploratory study of Bahrain's accounting and auditing professionals' perceptions about important issues relevant to developing and implementing global accounting standards. Bahrain is a financial hub of the Middle East with distinct features that could provide some insights to harmonization issues. The respondents' views portray optimism by auditors and non-auditors that harmonization of accounting standards is a worthwhile objective that can be fairly, but gradually accomplished. However, the survey data indicate expected challenges in applying the IFRS principles-based accounting standards. The survey findings suggest that there will be a growing demand for detailed application guidance for IFRS. Also, it appears that nationalism may well continue to be a major impediment to global adoption of IFRS.     

International financial reporting standards — credible and reliable? An overview

The study discusses how IFRS's objective of the harmonization of accounting standards and improvement of quality of financial reporting may have been negatively affected due to public authorities' influences in the European Union (EU), the U.S., the U.K. and China. In addition, we discuss issues related to the inconsistent interpretations and implementations of IFRS as principle-based accounting standards. Moreover, we discuss how the funding system of the IASB may (or may not) have affected its independence. The review of relevant literature and discussion is critical to IFRS adoption/convergence efforts in the U.S.     

Trends in research on international accounting harmonization

International harmonization of financial accounting standards has been the goal of many professional and academic accountants during the last 40 years. As of January 1, 2005, international accounting harmonization entered a new and perhaps decisive phase. From that date, all companies domiciled in the European Union with shares listed on securities exchanges are required to prepare their consolidated accounts in accordance with International Financial Reporting Standards (IFRS). This landmark event presents an opportunity for accounting researchers to assess the status of research on international accounting harmonization. In this paper, we review articles published in major English language accounting journals during the period from 1965 through 2004 in order to trace thematic and methodological trends in this line of research and to assess where the research may evolve from here.     

Measurement of formal harmonization progress:: The IASC experience

As a result of globalization, the accounting profession has become increasingly aware of the need to establish a single set of accounting standards that would be valid in the international arena. Recent events highlight the timeliness of this study, which provides an empirical measurement of International Accounting Standards Committee (IASC) progress throughout its harmonization history. The purpose of this article is twofold: first, a new measure of the advances achieved through formal harmonization and second, to use this methodology to evaluate the IASC achievements all through its standard-setting activity. Our results prove that the IASC has made great progress in regard to the level of harmony achieved through the accounting standards it has issued or revised. Nevertheless, we conclude that the IASC needs to continue working towards greater formal harmonization. Our study also indicates research directions that could advance the study of formal harmonization. This specific area of research has generally been disregarded in the existing literature, a trend we would like to see reversed, considering that its application can provide valuable insight for standard-setting processes, especially now that the accounting community is so conscious of the need to advance the harmonization process.     

On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system

The widespread acceptance of International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) makes it timely to examine their technical determinants as well as their implications for the accounting profession and the process of accounting harmonization. In this respect, we suggest that the principles-based approach to the standards and its inner flexibility enables the application of IAS/IFRS to countries with diverse accounting traditions and varying institutional conditions. Furthermore, the principles-based approach involves major changes in the expertise held by accountants and, hence, in their educational background, training programs, and in the organizational and business models of accounting firms. Finally, we submit that the standards set by the IAS/IFRS constitute a step forward in the process of accounting harmonization, although there is still far to go in the comparability of accounting measures across countries and regions.     

The effects of harmonization and convergence with IFRS on the timeliness of earnings reported under Chinese GAAP

This study examines the effects of a series of harmonization and convergence with IFRS on the timeliness of recognition of earnings in emerging Chinese markets. We find that earnings reported under Chinese GAAP have a lower earnings response coefficient, but a higher future earnings response coefficient, than earnings reported under IFRS before Chinese GAAP converged with IFRS in 2007. This indicates that earnings reported under Chinese GAAP are generally less timely than earnings reported under IFRS before convergence. We also find that the future earnings response coefficient of earnings reported under Chinese GAAP continues to increase, indicating that the timeliness of recognition of earnings reported under Chinese GAAP worsened after a series of harmonization and convergence with IFRS in China. Taken together, this study provides evidence indicating that harmonizing and converging national accounting standards with IFRS in emerging capital markets may not necessarily increase accounting quality.     

The rise and rise of IFRS: An examination of IFRS diffusion

We seek to understand the ever-increasing push towards the international harmonization of accounting standards and particularly the inexorable rise of standards produced by the International Accounting Standards Board (IASB). While the primary justifications for the increasing recognition given to these standards (IFRS) are economic, we question whether the empirical evidence to date has yielded convincing support for these arguments. We therefore offer an alternative explanation for the origin and diffusion of IFRS that incorporates social and political factors. Outsourcing the manufacture of accounting standards to a single private agency appears to be a rational, lower cost option – lowering both economic and political costs for individual states as long as they continue to retain residual decision rights with respect to the adoption of IFRS. However, such outsourcing must also be perceived to be legitimate. IFRS confer institutionalized legitimacy because they possess three characteristics required of a technology for global governance. These are sponsorship by powerful interest groups/regulators, internationality and plasticity. We therefore conclude that the widespread diffusion today of IFRS can at best be only partially explained as an economically rational phenomenon. Rather, the demand for legitimate action in the face of tightly coupled and complex global markets is at least equally important in generating support for IFRS.     

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Austria and Germany

Abstract

Austria and Germany share similar accounting traditions. International harmonization in both countries has mainly focused on group accounting. In contrast, single financial statements give rise to legal and tax consequences and, thus, are still tied to the traditional principles of orderly accounting. Recent regulatory changes confirmed this dual role of accounting in both countries, while moving local accounting rules closer to IFRS, although to different extents. We illustrate how recent regulations in the two countries made reference to IFRS, how IFRS was considered during the law-making process and outline major differences that remain between domestic and international accounting standards.     

Assessing international accounting harmonization using Hegelian dialectic,isomorphism and Foucault

This paper applies an innovative approach to explore the processes, effects and likely future progress of the convergence of national accounting standards with International Financial Reporting Standards (IFRS). Particular use is made of the Hegelian dialectic concepts of thesis, antithesis and synthesis; notions of isomorphism and decoupling; and, to a lesser extent, Foucault's concept of power–knowledge. Factors that are likely to explain the extent, rhythm and pattern of convergence of national accounting standards with IFRS are discussed. The paper concludes by highlighting four matters that are thought likely to enhance understanding of the process of international accounting standards harmonization; and by averring that the international harmonization process is a dialectical process influenced by belief systems that are constructed in a context of isomorphism and decoupling.     

Convergence of accounting standards and financial reporting externality: evidence from mandatory IFRS adoption

Using mandatory adoption of International Financial Reporting Standards (IFRS) as a natural experiment, we examine whether reporting externalities can be magnified when financial disclosures are based on a common set of accounting standards. Specifically, we investigate and find that the changes in publicly available information of mandatory IFRS adopters (due to the convergence of accounting standards) can impact the investment efficiency of prior voluntary adopters. While we document positive externalities of mandatory IFRS, we also observe heterogeneity in these spillover effects at the firm and the country level, suggesting that externalities increase with improvements in the comparability of accounting information.     

Assessing international accounting harmonization in Latin America

We draw on institutional theory and interviews with key informants to assess international accounting harmonization in the 13 countries of the Group of Latin American Accounting Standards Setters (GLASS). Some GLASS countries have effected full formal adoption of International Financial Reporting Standards (IFRS), but in others, IFRS are not permitted. In several GLASS countries, IFRS are supplemented by national standards for micro-entities and cooperatives. We conclude that it will be difficult to achieve material harmonization in GLASS countries due to a lack of trained accountants, unreliable enforcement systems, and competing institutional logics of taxation systems, banks and insurance companies.     

Does Convergence of Accounting Standards Lead to the Convergence of Accounting Practices?: A Study from China

In this empirical study we examine whether China's efforts to converge domestic accounting standards with International Financial Reporting Standards (IFRS) over the past 15 years have resulted in the successful convergence of Chinese listed firms. This study is unique in that we evaluate convergence of firms' accounting practices from three perspectives: (1) the level of compliance with Chinese GAAP and IFRS, (2) the consistency of accounting choices under Chinese GAAP and IFRS, and (3) identification of significant differences in the net incomes produced under Chinese GAAP and IFRS (earnings gap).Using the 1999 and 2002 annual reports of 79 Chinese listed firms we find improvement in both compliance with IFRS and in the consistency of the accounting methods used in annual reports prepared under Chinese GAAP and IFRS. We also find a reduction in the earnings gap from 1999 to 2002. However, interestingly we observed that Chinese listed firms' compliance with IFRS is significantly lower than their compliance with Chinese GAAP. Overall we believe that our findings suggest that in China the convergence of accounting standards has been a conduit to the convergence of accounting practices.     

Convergence in accounting standards: Insights from academicians and practitioners

The efficiency and competitiveness of global capital markets depends on the ability of financial statement preparers to communicate effectively with investors through financial reports. Despite the global movement to adopt IFRS, US adoption of IFRS is still uncertain. To assess potential for convergence, this study compares perspectives of academicians and practitioners regarding convergence to a set of global accounting standards. The majority of respondents believe that effective convergence to a set of globally accepted accounting standards would be beneficial to preparers, users, auditors, analysts, and standard setters. Convergence in accounting standards can require extensive and possibly costly changes to the standard-setting infrastructure and enforcement process in the US and other countries, and will also require proper training for management, auditors, and investors.     

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Croatia

Abstract

We examine the changes in Croatian accounting regulation, in the context of 2013/34/EU Directive implementation and analyse indirect effects of IFRS on national reporting regulation for non-listed companies. The main goal is to determine the level of conformity between Croatian accounting rules and IFRS as adopted by EU. Analysis shows that IFRS are used in the great extent as a source for provisions in Croatian Financial Reporting Standards (CFRS). There are only a few major differences between Croatian financial reporting standards and IFRS. However, there are a number of IFRS standards that are considered not to be relevant in the context of CFRS, as CFRS are intended to be used only by SMEs. Nevertheless, the management is permitted to use provisions and guidance from IFRS, if CFRS provisions are not applicable to a certain transaction or event.     

An examination of the perceptions of auditors and chief financial officers regarding principles versus rules based accounting standards

The debate over the adoption of International Financial Reporting Standards (IFRS) by United States issuers, or its convergence with U.S. Generally Accepted Accounting Principles (U.S. GAAP) has been going on for several years now. However, as of this writing, the Securities and Exchange Commission (SEC) has still not taken a definitive position on the issue. This is in part due to issues involving the cost of adoption, independence concerns relating to the IFRS promulgation body, the International Accounting Standards Board (IASB), and the debate over which type of accounting standards is superior for financial reporting: IFRS, which are said to be “principles-based,” or U.S. GAAP, which are said to be “rules-based.” In this paper we examined the views of two stakeholders in the U.S. financial reporting system, auditors in large public accounting firms and Chief Financial Officers in the Fortune 1000. We elicited their perceptions involving ten situations where specific rules are incorporated in U.S. GAAP. We asked if the elimination of the specific rule would be likely to better achieve the “qualitative characteristics of useful financial information” as defined by the Conceptual Framework for Financial Reporting adopted by the Financial Accounting Standards Board (FASB) in 2010 (FASB 2010) and the similar document adopted by the IASB at the same time (IASB 2010). We found that in eight of the ten situations both groups preferred the rules-based accounting regime (the current U.S. GAAP rules) over a principles-based approach.     

Adopting International Financial Reporting Standards for Small and Medium‐sized Enterprises

Diverse complications and controversial issues in the adoption of International Financial Reporting Standards (IFRS) for Small and Medium‐sized Enterprises (SMEs) have been reported by many jurisdictions, prompting them not to adopt this set of standards. Conversely many jurisdictions have adopted or are in the process of adopting IFRS for SMEs. This study considers the impetus for successfully achieving accounting convergence with IFRS for SMEs in those jurisdictions. The possible transition issues that may arise when countries adopt IFRS for SMEs are also highlighted. Furthermore, to provide pioneering evidence on the problems accountants encounter when applying IFRS for SMEs, we conduct a survey on accounting practitioners in Fiji – an early adopter of this set of standards. Both the insights provided on the process of embracing IFRS for SMEs in Fiji and the opinions elicited from accountants highlight new dimensions to the inherent problems in IFRS for SMEs. Scant attention has been given to this issue so far; hence the empirical evidence provided by our study informs not only the global convergence of SME accounting but also the quality of the current suite of IFRS for SMEs.     

The Role of National Culture in International Financial Reporting Standards Adoption

Prior research shows that the development of national accounting systems follows different patterns in different countries over the world. This was recently supported by the staggered manner in which countries adopt IFRS. Extant evidence shows that IFRS adoption decisions at the country level are determined by institutional and economic factors. In this context, cultural factors have not been considered. This paper examines the relationship between five cultural dimensions and countries’ decisions to adopt International Financial Reporting Standards (IFRS) around the world during the period 2003-2014. We find that countries with higher levels of uncertainty avoidance are more likely to adopt IFRS. Additionally, they are more likely to commit to early adoption largely on a mandatory rather than voluntary basis. On the other hand, countries with higher values of masculinity are more likely to adopt IFRS early, but the extent (whether voluntary or mandatory adoption) of adoption is not significantly related to masculinity. Finally, we show that countries with higher power distance (long-term orientation) are more (less) likely to adopt IFRS on a mandatory basis. The results are in line with Gray’s theory of cultural influence and suggest that differences in national culture had a significant role in countries’ reaction to the introduction of IFRS as a set of unified accounting standards targeting the harmonization of accounting standards adopted across different jurisdictions.     

Unconditional conservatism under the Chinese version of IFRS

This study explores the level of unconditional conservatism (UNCC) in accounting after China’s convergence with International Financial Reporting Standards (IFRS). Using the intercept of the Basu (1997) model, an overall reduction is found in UNCC under the Chinese version of IFRS. This study is the first attempt to conduct a comprehensive theoretical comparison between old and new Chinese accounting standards (CAS) in terms of UNCC. Additionally, it is the first study on the impact of convergence with IFRS, not the full adoption of IFRS, on UNCC. Finally, the study covers a relatively more extended period than most previous studies, from 1996 to 2017.