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

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  • Jones, Stewart
  • Finley, Aimee

Abstract

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.

Suggested Citation

  • Jones, Stewart & Finley, Aimee, 2011. "Have IFRS made a difference to intra-country financial reporting diversity?," The British Accounting Review, Elsevier, vol. 43(1), pages 22-38.
    • Handle: RePEc:eee:bracre:v:43:y:2011:i:1:p:22-38
    DOI: 10.1016/j.bar.2010.10.004
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    3. Warwick Stent & Michael E. Bradbury & Jill Hooks, 2017. "Insights into accounting choice from the adoption timing of International Financial Reporting Standards," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57, pages 255-276, April.
    4. Iain Clacher & Alan Duboisée Ricquebourg & Allan Hodgson, 2013. "The Value Relevance of Direct Cash Flows under International Financial Reporting Standards," Abacus, Accounting Foundation, University of Sydney, vol. 49(3), pages 367-395, September.
    5. Haruna, Dzugwahi & Apedzan Emmanuel, Kighir, 2018. "Ifrs Adoption And Shareholders' Wealth Of Deposit Money Banks In Nigeria," International Journal of Contemporary Accounting Issues-IJCAI (formerly International Journal of Accounting & Finance IJAF), The Institute of Chartered Accountants of Nigeria (ICAN), vol. 7(2), pages 16-30, December.
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    7. Alex Frino & Riccardo Palumbo & Francesco Capalbo & Dionigi Gerace & Vito Mollica, 2013. "Information Disclosure and Stock Liquidity: Evidence from Borsa Italiana," Abacus, Accounting Foundation, University of Sydney, vol. 49(4), pages 423-440, December.
    8. Matthias Klumpp, 2017. "Do Forwarders Improve Sustainability Efficiency? Evidence from a European DEA Malmquist Index Calculation," Sustainability, MDPI, vol. 9(5), pages 1-33, May.
    9. Vladimir Obradović & Milan Čupić & Dragomir Dimitrijević, 2018. "Application of International Financial Reporting Standards in the Transition Economy of Serbia," Australian Accounting Review, CPA Australia, vol. 28(1), pages 48-60, March.
    10. Ngoc Thi Bui & Oanh Thi Tu Le & Huy Manh Dao, 2020. "Estimation of Benefits and Difficulties When Applying IFRS in Vietnam: From Business Perspective," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 165-179, July.
    11. Bernard Raffournier, 2013. "Has accounting quality increased in Europe after IFRS adoption?," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2013(2), pages 71-78.
    12. Agung Nur Probohudono & Bambang Sugiharto & Siti Arifah, 2019. "The Influence Of Corporate Governance, Audit Quality, And Ownership, On Financial Instrument Disclosure In Indonesia," Journal of Contemporary Accounting, Master in Accounting Program, Faculty of Business & Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia, vol. 1(3), pages 173-187, May.
    13. Lueg, Rainer & Punda, Pawel & Burkert, Michael, 2014. "Does transition to IFRS substantially affect key financial ratios in shareholder-oriented common law regimes? Evidence from the UK," Advances in accounting, Elsevier, vol. 30(1), pages 241-250.
    14. Lambert Jerman, 2013. "La Juste Valeur : Une Comptabilite Actuarielle Pour Les Marches ... Ou Les Comptables ?," Post-Print hal-00991877, HAL.
    15. Solomon Opare & Muhammad Nurul Houqe & Tony van Zijl, 2021. "Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital," Abacus, Accounting Foundation, University of Sydney, vol. 57(3), pages 502-556, September.
    16. Walid Guermazi, 2023. "International financial reporting standards adoption in the European Union and earnings conservatism: a review of empirical research," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(2), pages 200-211, June.
    17. Humayun Kabir & Fawzi Laswad, 2015. "The Impact of Improvements in Institutional Oversight on IFRS Accrual Quality in Europe," Australian Accounting Review, CPA Australia, vol. 25(4), pages 428-444, December.
    18. repec:dau:papers:123456789/13729 is not listed on IDEAS
    19. Iatridis, George & Dimitras, Augustinos I., 2013. "Financial crisis and accounting quality: Evidence from five European countries," Advances in accounting, Elsevier, vol. 29(1), pages 154-160.
    20. Lambert Jerman, 2015. "Les Enjeux De L'Application Des Normes Ias-Ifrs : L'Etude Des Preparateurs Des Comptes, Une Perspective De Recherche Encore Inexploree," Post-Print hal-01188736, HAL.
    21. Anubha Srivastava & Preeti Kulshrestha, 2021. "Ind-AS Enforcement in India: An Assessment of Readiness, Benefits and Key Challenges," Paradigm, , vol. 25(1), pages 25-41, June.
    22. George Emmanuel Iatridis, 2012. "Voluntary IFRS disclosures: evidence from the transition from UK GAAP to IFRSs," Managerial Auditing Journal, Emerald Group Publishing, vol. 27(6), pages 573-597, June.

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    More about this item

    Keywords

    Coefficient of variation; Financial reporting diversity; IFRS;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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