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IFRS Adoption and Accounting Quality: A Review

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  • Naomi Soderstrom
  • Kevin Jialin Sun

Abstract

In 2002, the European Union (EU) Parliament passed a regulation that requires consolidated and simple accounts for all companies listed in the EU to use International Financial Reporting Standards (IFRS) for fiscal years starting after 1 January 2005. This change in accounting systems will have a large impact on the information environment for EU companies. This paper provides a review of the literature on adoption of different Generally Accepted Accounting Principles (GAAP). We thus provide background and guidance for researchers studying the change in accounting quality following widespread IFRS adoption in the EU. We argue that cross-country differences in accounting quality are likely to remain following IFRS adoption because accounting quality is a function of the firm's overall institutional setting, including the legal and political system of the country in which the firm resides.

Suggested Citation

  • Naomi Soderstrom & Kevin Jialin Sun, 2007. "IFRS Adoption and Accounting Quality: A Review," European Accounting Review, Taylor & Francis Journals, vol. 16(4), pages 675-702.
    • Handle: RePEc:taf:euract:v:16:y:2007:i:4:p:675-702
    DOI: 10.1080/09638180701706732
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    References listed on IDEAS

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    1. Ray Ball, 2006. "International Financial Reporting Standards (IFRS): pros and cons for investors," Accounting and Business Research, Taylor & Francis Journals, vol. 36(S1), pages 5-27.
    2. Abe De Jong & Miguel Rosellón & Patrick Verwijmeren, 2006. "The Economic Consequences of IFRS: The Impact of IAS 32 on Preference Shares in the Netherlands," Accounting in Europe, Taylor & Francis Journals, vol. 3(1), pages 169-185, October.
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