Have IFRS made a difference to intra-country financial reporting diversity?

According to the International Accounting Standards Board (IASB), International Financial Reporting Standards (IFRS) are intended to provide a common set of globally applicable accounting standards, having the ultimate aim of reducing international financial reporting diversity. Much previous research on standards harmonisation has been conducted on relatively small samples and in periods which pre-date the introduction of mandatory IFRS in the EU and Australia. Most of these studies have also relied on some form of indexing technique to measure harmonisation (such as the modified C-index) which have since been challenged in the literature. Based on a sample of 81,560 firm years, this study examines whether the mandatory IFRS regime has led to any significant reductions in overall financial reporting diversity by companies within the EU and Australia. Financial reporting diversity is proxied by the variability of several balance sheet, income statement and cash flow statement ratios measured over the pre-IFRS and post-IFRS periods. Variability is measured by the coefficient of variation (CV), a scale neutral measure of dispersion of a probability distribution. This measure avoids many of the methodological problems associated with index techniques. Notwithstanding some mixed findings, the group mean comparisons and multiple regression results indicate some statistically significant reductions in the variability of ratio measures in the post-IFRS period, even after controlling for factors such as firm size, industry and adoption status (whether a country is an IFRS adopter or not). While the results should be viewed as preliminary, they provide some tentative support for IASB’s current policy direction towards global accounting standards convergence (for instance, the IASB-FASB convergence project). The results also have implications for other countries contemplating a shift to IFRS, such as the United States and several Asian nations, including Japan and India. A useful direction for future research is to determine whether the same results hold using a more extensive post-IFRS sample.     

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

Abstract

Dutch law (B2T9) is positive towards IFRS. IFRS may be used by all entities, there is a specific option for entities using IFRS in the consolidated financial statements to apply an IFRS-friendly version of B2T9 in its separate financial statements, and IFRS for SMEs can be used by non-listed and non-regulated companies in combination with B2T9. In the process of adoption of the 2013 EU Accounting Directive only limited references have been made to IFRS. This is not an indication of a reduced interest in IFRS, but is a result of limiting the changes of B2T9 to those that are necessary as a result of changes at the EU level. The Dutch Accounting Standards Board, issuing Dutch Accounting Standards (DAS), considers IFRS when developing and changing its standards. In addition to the IFRS option DAS often include one or more additional optional treatments that are considered suitable for non-listed companies. The Dutch regulatory authority AFM is also positive towards IFRS and even advocates elimination of non-IFRS options from Dutch GAAP as much as possible. The number of major differences between Dutch GAAP and IFRS is relatively limited, with only a few differences that cannot be avoided by an entity when preparing financial statements under Dutch GAAP.     

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

Abstract

Romanian accounting rules (RAR) had followed a convergence process with International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) since 1999, and the level of convergence has increased over time. The Romanian accounting regulator continues to follow IAS/IFRS in internalizing the Accounting Directive 2013 Directive 2013/34/EU. Directive 2013/34/EU of the European Parliament and of the Council on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, Official Journal of the European Union, L 182/19. [Google Scholar]/34/EU. Only a few major differences still exist (some of them due the restrictions in the Accounting Directive 2013 Directive 2013/34/EU. Directive 2013/34/EU of the European Parliament and of the Council on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, Official Journal of the European Union, L 182/19. [Google Scholar]/34/EU) between RAR and IFRS. However, RAR lack the level of detail existing in IFRS, and IFRS cannot be used in practice as a source of guidance and interpretation. While major stakeholders have a positive attitude towards the convergence with IAS/IFRS, the Romanian accounting regulator intends to keep the control over RAR and avoid differences in interpretations that might have tax consequences. Despite the good level of convergence of RAR with IFRS, practitioners tend to continue to utilize the tax approach as a source of guidance and interpretation.     

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

Abstract

We examine the extent to which International Financial Reporting Standards (IFRSs) are used as a reference point and as a basis for the development of accounting standards in the Republic of Ireland (ROI). In particular, the focus is on accounting standards applicable to entities other than those listed on a regulated EU market. The objective is to provide a deeper understanding of the direct and indirect effect of IFRS on accounting standards applicable predominantly to private companies limited by shares in ROI. We illustrate how the historical links between the UK and ROI continue to influence accounting standards applicable in ROI. The enactment of the Companies (Accounting) Bill 2016 into ROI law will maintain the traditional alignment of UK and ROI accounting regulation, whilst simultaneously bringing into force the remaining aspects of the EU Accounting Directive 2013/34/EU, not currently applicable in ROI.     

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.     

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

Abstract

As it is not a member of the European Union, Turkey has not yet adopted EU accounting directives by law. Instead, Turkish standard setting authority adopted International Financial Reporting Standards for entities that have public accountability and has recently prepared the draft Turkish financial reporting standard for non-publicly accountable entities that are subject to independent audit: Framework for Local Financial Reporting. This national standard is influenced by European accounting directive 2013/34, international financial reporting practices and UK experience in addition to national accounting rules.     

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

Abstract

I present a summary and analysis of a series of papers from this special issue of Accounting in Europe that examine the role and current status of International Financial Reporting Standard (IFRS) in the completion of National Accounting Rules applicable to large ‘non-listed in a regulated market’ non-financial undertakings trading for gain in 25 European countries following the recent implementation of the new European Accounting Directive 2013/34/EU. IFRS has had a varying degree of influence across European countries. Some refer and are closely aligned to IFRS or to IFRS for small and medium-sized entities, some while influenced by IFRS retain complete independence and some show limited influence mostly when accounts are for other purposes such as taxation, dividend distribution or creditor protection. I present a number of classification schemes and contrast these with Nobes [(2008). Accounting classification in the IFRS Era. Australian Accounting Review, 18(3), 191–198] two group accounting classification of European accounting systems as strong equity/commercially driven versus weak equity/government driven/tax-dominated systems.     

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

Abstract

Law 4308/2014 is the main regulation that transposed Accounting Directive 2013/34 of the EU into national law in Greece. This short paper summarises the underlying background and the process followed up to the issuance of this Law. It also outlines the key accounting principles introduced with this Law and how they compare with IFRS. This brief analysis indicates that, to a large extent, Greek accounting standards have now been aligned with IFRS. Given the preceding substantial differences between Greek accounting Laws and IFRS, this Law introduced significant changes to the accounting environment for non-listed companies in Greece, aiming at improving accounting quality and enhancing accounting comparability between listed and non-listed companies.     

Measuring the Comparability of Company Accounts Conditionally: A Research Note

Comparability indices summarize the level of comparability between companies at a national and international level, an issue of importance to investors, regulators, and standard setters. Comparability indices can identify areas where comparability is low and where comparability is deteriorating. Furthermore, they can be used to quantify the extent to which initiatives such as International Financial Reporting Standards (IFRS) are successful in raising comparability between company accounts. Despite past literature emphasizing how factors other than country influence accounting methods used by companies, current comparability indices ignore these other factors. This paper introduces new national and international indices within the T index framework to fill this gap in the literature. Formula for the new national and international indices, and their standard errors, are provided. An example using European data is used to demonstrate the calculations and illustrate the importance of controlling for these firm specific factors.