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Legitimacy theory may explain the failure of global adoption of IFRS: the case of Europe and the U.S

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  • Francesco De Luca

    (University “G. d’Annunzio”)

  • Jenice Prather-Kinsey

    (University of Alabama at Birmingham)

Abstract

We investigate the reasons why “adoption” of one set of globally accepted accounting standards is presently unachievable. By “adoption” we mean that a jurisdiction incorporates IFRS instantly as its national accounting as issued by the IASB. We state that the IASB has used a Legitimacy Theory strategy to gain acceptance of its standards by more than 120 countries across the globe but it has only gained pseudo-“adoption” (not as published by the IASB) of its standards by many countries. We contend that achieving policing and enforcement of its standards globally has proven to be empirically illusive. This legitimacy deficit may explain why convergence between the IASB and FASB is currently idle. We offer a possible solution to bridging the legitimacy gap of global adoption of IFRS. We propose an internationally respected regulator and suggest the IOSCO for this role through its participation in the IFRS Foundation Monitoring Board for policing and enforcement of IFRS for cross-listed firms reporting in compliance with IFRS so that the IASB’s output legitimacy may be achieved globally.

Suggested Citation

  • Francesco De Luca & Jenice Prather-Kinsey, 2018. "Legitimacy theory may explain the failure of global adoption of IFRS: the case of Europe and the U.S," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(3), pages 501-534, September.
    • Handle: RePEc:kap:jmgtgv:v:22:y:2018:i:3:d:10.1007_s10997-018-9409-9
    DOI: 10.1007/s10997-018-9409-9
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    2. Zhuquan Wang & Javed Miraj, 2018. "Adoption of International Public Sector Accounting Standards in Public Sector of Developing Economies -Analysis of Five South Asian Countries," Research in World Economy, Research in World Economy, Sciedu Press, vol. 9(2), pages 44-51, June.
    3. Francesca Gennari & Daniela M. Salvioni, 2019. "CSR committees on boards: the impact of the external country level factors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(3), pages 759-785, September.
    4. Jenice Prather-Kinsey & Francesco De Luca & Ho-Tan-Phat Phan, 2022. "Improving the global comparability of IFRS-based financial reporting through global enforcement: a proposed organizational dynamic," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(3), pages 330-351, September.

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