...IFRS adoption and analysts’ earnings forecasts: Australian evidence Julie Cottera University of Southern Queensland Ann Tarcab University of Western Australia Marvin Weeb University of Western Australia a b University of Southern Queensland. University of Western Australia. Address for correspondence: Ann Tarca, UWA Business School, M250, 35 Stirling Highway, Crawley, Western Australia 6009. Email: Ann.Tarca@uwa.edu.au Tel: +61 8 6488 3868. Version 24 August 2009 ____________________________________________________________ _____________ We thank Wendy Hsu, Tasha Grieve, Dessalegn Mihret, Lalith Seelanatha and Anthony Vu for data collection assistance. We also acknowledge the financial support of the Accounting and Finance Association of Australia and New Zealand (AFAANZ), UWA Business School and the University of Southern Queensland. We thank Millicent Chang, John Holland, Izan and seminar participants at Monash University and the University of Queensland for their helpful comments. We particularly acknowledge the assistance of Philip Brown and John Preiato in the preparation of this paper. IFRS adoption and analysts’ earnings forecasts: Australian evidence Abstract We study 145 large listed Australian firms to explore the impact of IFRS adoption on the properties of analysts’ forecasts and the role of firm disclosure about IFRS impact. We find that analyst forecast accuracy improves and there is no significant change in dispersion in the adoption year, suggesting...
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...What is the effect of mandatory IFRS adoption on earning management ABSTRACT: International Accounting Standard play a important role in the world. More and more countries trend to adopt international accounting standard. Beginning in 2005, public companies in the member states of the European Union (EU) are required to apply IFRS. Ten years have passed, what is the effect of mandatory IFRS adoption on these countries, and how IFRS affect on earning management. In the paper, I will discuss this question based on some previous finding. Next, I will use IFRS 9 as a specific case for my conclusion. Finally, I will give my opinion on the effect of mandatory IFRS adoption on earning management. Key Words: Accounting Standard, earning management, IFRS, Financial Instrument, bank, impairment of asset, IAS39, IFRS 9 I. The effect of mandatory IFRS adoption on earning management 1.1 In 2012, Yi Lin Chua, Chee Seng Cheong. And Graeme Gould publish a article named “The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence form Australis. This article examines the impact of IFRS on accounting quality by focusing on threes perspectives: (1) earning management, (2) timely loss recognition, and (3) value relevance. In my paper, I will focus on earning management. First, the author talk about the reason he choose Australia. Because Australia is one of the first countries located outside of the EU that has mandated IFRS and is also the first non-EU adopting...
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...ABSTRACT First Adoption of International Financial Reporting Standards sets out the procedures that an entity must follow when it adopts IFRS for the first time as the basis for preparing its general purpose financial statements. An entity may be first adopter if, in the preceding year, it prepared IFRS financial statements for internal management use, as long as those IFRS financial statements were not made available to external parties such as investors or creditors. In Malaysian data, IFRS standards are yet to be implemented. However, the results are of significant benefit for local standard setters as well as for other emerging countries that have similar capital market and institutional characteristics. More research could be conducted in other environments so that the impact of IFRS adoption in different environments can be revealed. Furthermore, additional studies can also consider other attributes of earnings quality such as earnings conservatism, predictability, comparability, persistence and timeliness. INTRODUCTION Mazars is a universal audit, accounting and discussing group employing more than 13,500 professionals in 71 countries through member firms. Mazars is the 11th largest accounting firm in the world. Mazars has a network of equivalent partners and joint ventures in a further 21 countries and is a founding member of the Praxity alliance, a network of independent firms. The Institute of Chartered Accountants in England and Wales (ICAEW)...
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...statements are presented in various ways, a large quantity of the world’s listed companies use either IFRS or US GAAP. In spite of the heavy blow to the SEC of US which has announced that it will delay further statements regarding a timetable for its ultimate decision on the implementation of IFRS, the main trend of adoption of IFRS has not changed (Whitehouse, 2012). IFRS have also been adopted elsewhere. The purpose of this report is that estimate the market reactions of the UK when the UK market has adopted the IFRS. 1.2 Overview The remainder of the paper is organized as follows. Section II discusses the background of IFRS adoption in Europe. Section III reviews prior research and provides the basis for interpreting the market reaction to each event. Section IV describes our data and research design. Section V presents our empirical results, and Section VI presents sensitivity analyses. Section VII concludes. Literature review Debates about financial reporting and accounting standards can seem arcane, tedious and irrelevant. However the current debate about whether IFRS drove banker recklessness is getting interesting. The aims of the literature review to discuss how the accounting standards transform into IFRS in the UK market. It has been debated hotly in financial statements. Some people have remained the positive attitudes to IFRS. Armstrong et al (2009) suggest that IFRS is highly quality financial reporting relative to application of domestic standards that improve...
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...é The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research October 2014 Information for Better Markets An initiative from the ICAEW Financial Reporting Faculty The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research forms part of the Information for Better Markets thought leadership programme of ICAEW’s Financial Reporting Faculty. ICAEW operates under a Royal Charter, working in the public interest. As a world leading professional accountancy body, ICAEW provides leadership and practical support to over 142,000 members in more than 160 countries, working with governments, regulators and industry to ensure the highest standards are maintained. The ICAEW Financial Reporting Faculty provides its members with practical assistance and support with IFRS, UK GAAP and other aspects of business reporting. It also comments on business reporting issues on behalf of ICAEW to standard setters and regulators. Its Information for Better Markets thought leadership programme subjects key questions in business reporting to careful and impartial analysis so as to help achieve practical solutions to complex problems. The programme focuses on three key themes: disclosure, measurement and regulation. We welcome comments and enquiries on this report and on the other aspects of the Information for Better Markets programme. To contact us, please email bettermarkets@icaew.com. © ICAEW 2014 All rights reserved. If you want...
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...benefits do you see from the growing adoption of IFRS across countries? Growing the adoption of IFRS across countries will allow for more comparable financial statements and disclosures globally. Investors and other financial statement users will be able to see how international companies compare to one another. Currently, U.S. Generally Accepted Accounting Principles (GAAP) varies from IFRS in many ways, some causing significant differences in accounting for certain topics. Growing the adoption will also allow companies and all its subsidiaries to use the same set of standards. 2. In your mind, what are the three most substantial challenges to the growth and development of IFRS in the coming years? Why? The three most substantial challenges to the growth and development of IFRS in the coming years are “convergence” or full adoption of IFRS, large costs of adopting IFRS, and the disagreement with the EU. Convincing all nations to adopt IFRS as is, with no specific national standards stepping in, is going to be a difficult process. “Convergence is an impossible dream. You will always find issues where you basically don’t agree and where both sides have good reasons for not agreeing. You’ve just go to make a decision. Fiddling with IFRS locally is not the way forward,” said Ian Mackintosh head of the U.K. Accounting Standards Board. There will be large costs associated with companies switching to IFRS. Implementing new software that follows IFRS and ensuring everything is being...
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...www.ccsenet.org/ijbm International Journal of Business and Management Vol. 7, No. 3; February 2012 Adoption of International Financial Reporting Standards in Developing Countries: The Case of Nigeria Abdulkadir Madawaki College of Business, Universiti Utara Malaysia Sintok, 06010 Kedah, Malaysia E-mail: abdulkadirmadawaki@yahoo.com Received: September 16, 2011 doi:10.5539/ijbm.v7n3p152 Abstract The study focused on the adoption process of International Financial Reporting Standards (IFRS) on a developing economy, with particular reference to Nigeria. The paper is based on the data obtained from literature survey and archival sources in the context of the globalization of International Financial Reporting and the adoption of International Financial Reporting Standards (IFRS).Nigeria has embraced IFRS in order to participate in the benefits it offers, including attracting foreign direct investment, reduction of the cost of doing business, and cross border listing. In implementing IFRS Nigeria will face challenges including the development of a legal and regulatory framework, awareness campaign, and training of personnel. Recommendations were made to forestall such challenges which include strengthening education and training, establishment of an independent body to monitor and enforce accounting and auditing standards. Keywords: Financial reporting, Adoption, Accounting standard and Developing countries 1. Introduction Globalization of capital markets is an irreversible...
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...Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence* ANWER S. AHMED, Texas A&M University MICHAEL NEEL, University of Houston DECHUN WANG, Texas A&M University 1. Introduction We provide evidence on the preliminary effects of mandatory adoption of International Financial Reporting Standards (IFRS) on accounting quality for a relatively broad set of firms from 20 countries that adopted IFRS in 2005 relative to a benchmark group of firms from countries that did not adopt IFRS matched on the strength of legal enforcement, industry, size, book-to-market, and accounting performance. Understanding the effects of mandatory adoption on properties of accounting numbers is of potential interest to standard-setters and securities regulators in countries that are considering IFRS adoption as well as in countries that have already adopted IFRS. Furthermore, evidence on this question is of particular importance to the IASB because it can help the board evaluate whether its stated objective of improving accounting quality is being accomplished (see IASC 1989; Barth 2008). Finally, analysts, investors, and other users may also find it useful to understand the effects of IFRS adoption on accounting quality to potentially reassess how they use accounting numbers. The effects of mandatory IFRS adoption on accounting quality critically depend upon whether IFRS are of higher or lower quality than domestic GAAP and how they affect the efficacy of enforcement mechanisms...
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... Introduction In the United States, the SEC is expected to eventually mandate the adoption of International Financial Reporting Standards (IFRS). U.S. standards setters have been working toward this eventuality through a process of convergence. The SEC issued a statement in early 2010 that updated its timeline and indicated that companies could be required to adopt IFRS as early as 2015 (see SEC, "Commission Statement in Support of Convergence and Global Accounting Standards," Release Nos. 33-9109; 34-61578, February 24, 2010, at www.sec.gov/nles/other/2010/33-9109.pdf). The SEC plans to revisit the issue this year. The general consensus suggests, however, that under IFRS, the last-in, first-out (LIFO) inventory valuation method will no longer be permitted for financial or tax reporting. The adoption of IFRS is a contentious issue for companies currently using LIFO as an inventory valuation method. In order to claim the tax benefits of LIFO, companies must also present financial statements using the same method, as required by the conformity rule (IRC section 472 [c]). LIFO is not permitted under IFRS, which means U.S. companies must switch from LIFO to first-in, first-out (FIFO) or average cost upon adoption of IFRS. Although only a small subset of U.S. companies currently uses LIFO for at least some of their operations, a change in inventory valuation method can have a significant impact on reported income, inventory balances, tax liabilities, and key financial ratios. Indeed...
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...Highlights of IFRS Research By CYNTHIA BOLT-LEE, CPA and L. MURPHY SMITH, CPA, DBA NOVEMBER 2009 Conversion from U.S. GAAP to IFRS is a heavily discussed topic in the corporate world. Expected benefits of adoption include reporting consistency, enhanced global competition and improved financial reporting transparency. While many countries worldwide have already adopted IFRS, many other countries are closely examining its effects before adoption, not only from an economic perspective but also from a reporting quality position. COMPARING RESULTS Researchers Elaine Henry, Stephen Lin and Ya-Wen Yang evaluated the difference between financial results under U.S. GAAP compared to IFRS. Their results show that convergence between U.S. GAAP and IFRS is occurring. Using 2004 to 2006 reconciliation disclosures, the authors found that the calculated difference between shareholders’ equity under U.S. GAAP and under IFRS declined from 2004 to 2006. In addition, the difference between U.S. GAAP and IFRS reported net income during this period also declined but remained significantly different. Pensions and goodwill appeared to be the dominant reconciliation items. Reconciliation amounts varied by industry and country, raising questions about consistency between region and industry. Additionally, more than 70% of the companies examined in 2004 through 2006 had a higher return on equity under IFRS compared to U.S. GAAP. The 2007 SEC elimination of the IFRS-to-U.S. GAAP reconciliation...
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...SUMMARY “Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors” by Luzi Hail, Christian Leuz and Peter Wysocki: In the world of accounting, abandoning the United States’ Generally Accepted Accounting Principles (U.S. GAAP) in favor of the International Financial Reporting Standards (IFRS) would represent a seismic shift that would require changing what has been the country’s accounting gold standard for decades. This is what the Securities and Exchange Commission (SEC) is contemplating for all publicly listed companies, starting in 2014. But according to a study released today (Friday, March 6) it is not clear whether such a major shift in standards would translate into large (net) benefits for most companies or the entire U.S. economy. The study, “Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors,” was done by Christian Leuz of the University of Chicago Booth School of Business, Luzi Hail of the Wharton School at the University of Pennsylvania and Peter Wysocki of the MIT Sloan School of Management. One of the touted benefits of moving to IFRS is that it can enhance the liquidity of capital markets and reduce companies’ costs of capital by providing investors with better information on corporate performance. However, the authors argue that this is true only if adopting a new set of standards actually improves the quality of...
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...Under the circumstances, it would be imperative for Indian corporates to adopt IFRS for their financial reporting. IFRS adoption procedure in India To rationalize accounting practices in the country, the Indian government in 1949, established Institute of Chartered Accountants of India by passing ICAI Act, 1949. Accounting Standard Board was constituted by ICAI in 1977 in order to create harmony among the diversified accounting policies and practices in India. Three steps process was laid down by the accounting professionals in India which are summarized as...
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...Accounting Horizons Vol. 24, No. 3 2010 pp. 355–394 American Accounting Association DOI: 10.2308/acch.2010.24.3.355 Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis Luzi Hail, Christian Leuz, and Peter Wysocki SYNOPSIS: This article is Part I of a two-part series analyzing the economic and policy factors related to the potential adoption of IFRS by the United States. In this part, we develop the conceptual framework for our analysis of potential costs and benefits from IFRS adoption in the United States. Drawing on the academic literature in accounting, finance, and economics, we assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We also discuss the compatibility of IFRS with the current U.S. regulatory and legal environment, as well as the possible macroeconomic effects of IFRS adoption. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit trade-off between ͑1͒ recurring, albeit modest, comparability benefits for investors; ͑2͒ recurring future cost savings that will largely accrue to multinational companies; and ͑3͒ one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. In Part II of the series ͑see Hail et al. 2010͒, we provide an analysis...
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...Primary benefits Obviously, the IFRS adoption will bring a great deal of benefit to Japan. At first, the IFRS adoption will assist Japanese corporations especially those large MNCs embracing the global capital market in fast speed. As world’s third large economy, Japan houses a great number of prestigious international corporations, such as Toyota, Sharp, Sony and Toshiba etc. However, the discrepancy between local GAAP and IFRS to some extent hinders those Japanese MNCs from entering into the global market. In this condition, the adoption of IFRS by Japan is to eliminate this discrepancy and improve the understandability of financial statement of those MNCs, which is determinant for global investors for their capital investment decision (IASPUS, 2016). Secondly, the adoption of IFRS by Japan is going to enhance the compatibility of financial statements provided by Japanese corporations. The survey of IFRS in 2015 indicates that over 174 jurisdictions, as well as large entities in the world, have already taken IFRS for their corporate disclosure (IFRS, 2015). Therefore, it seems to be extremely urgent for Japan to adopt IFRS as it determines the acceptability of its large entities to the global GAAP. The financial report prepared in accordance with IFRS is taken as more compatible, which is beneficial for its stakeholders to understand and compare before their decision making. Thirdly, the IFRS adoption by Japan is going to improve nation’s capital market, making it more international-standardized...
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...preliminary evidence on the costs related to mandated IFRS adoption. By analyzing the fees incurred by firms for the statutory audit of their financial statements subsequent to the adoption of IFRS; a considerable and evident cost incurred by all firms was quantified in order to separate, and more fully understand the costs associated with harmonization observed in prior literature. Using a comprehensive dataset of all publicly-traded Australian companies, it was estimated that the mean level of audit costs in the year of IFRS transition increases 23%, along with an abnormal IFRS-related increase in audit costs of eight percent (i.e., beyond normal yearly fee increases); although varying with firm size and firm IFRS exposure. Also, further analysis suggested a fixed component in the costs associated with IFRS adoption being carried by the smallest firms. Consequently, small firms exhibited disproportionately larger increases in audit fees around the adoption of IFRS, relative to large firms. A survey of professional auditors at a Big 4 accounting firm showed that auditors believe that certain aspects of the new IFRS reporting requirements need greater auditor effort and expertise in order to ensure sufficient compliance. Such requirements might be Share-based incentive payments, Financial instruments including hedge accounting, and Impairment of goodwill and other intangible balances. By constructing a firm-specific score of IFRS-exposure based on the survey results, it was confirmed...
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