Abstract
The international financial reporting standards (IFRS) utilise values-based approach. It underscores rational value book-keeping. It aims the promotion of consistency and equivalence globally. The study undertaken in this paper explores IFRS from diverse perspectives by reviewing peer reviewed articles to establish the many aspects of the concept. It has been established that the obligatory IFRS implementation and the prediction enhances the value of the data setting considerably. Research indicate that the mandatory IFRS adoption can provide economic benefits to firms in low enforcement countries as observed by Steve Lin. Other scholars including Anwer Ahmed and Dechun Wang observe that 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.
Additionally, scholars indicate that incomes and book value are substantial factors of credit danger. However, the implementation of IFRS does not alter the general credit danger awareness. Others argue that only a subsection of organisations undergo business volume responses to the remunerations settlement even with the IFRS implementation.
Introduction
The international financial reporting standards also abbreviated as IFRS are accounting standards set by the International Accounting Standards Board (IASB) showing particular guidelines on how financial reporting should be done uniformly across the world. In fact, the international financial reporting standards are intended to ensure that companies that have various operations in different parts of the world have a common method of reporting their financial statements (Lin, 2012).
The move to develop the International Reporting Standards was also intended to ensure that accountants uphold comprehensible, similar and consistent accounting records. The IFRSs were developed to replace the Universal Accounting Principles. However, the International Reporting standard’s goal is the harmonisation of the reporting of financial standards globally and ensures comparison is possible across the world (Ahmed and Wang, 2013).
Importance of the study
The study of IFRSs ensures transparency in financial reporting. The approach is of great importance to the shareholders and financiers of various companies across the world as high quality statements are also produced. Besides, the study of IFRSs ensures that emerging markets are put into consideration hence leading to comprehensive reporting. Finally, IFRSs study is important since it is easy to evaluate the performance of a business that employs IFRSs in reporting its financial statements, and this leads to sound decision-making.
Literature review
Does mandatory IFRS adoption improve the information environment? (Joanne Horton and Loanna Serafeim)
Aims
The article aims at determining the characteristics of IFRS that can result in an enhancement in the data setting of organisations.
Methodologies
The methodology utilised in the article is based on prior research by other researchers to examine if the rise in prediction precision can be credited to better-quality data, superior similarity from IFRS acceptance. It also measures if IFRS offers executives more prospects to influence their remunerations and consequently meet forecasters’ estimates.
Results
Horton et al. found that, upon compulsory IFRS implementation, the prediction precision and various procedures of the value of the data setting rises considerably more for compulsory adopters comparative to non-adopters and deliberate adopters (Horton and Serafeim, 2013).
The impact of firm characteristics on trading volume reaction to the earnings reconciliation from IFRS to U.S. GAAP (Steve Lin)
Aims
The article aims to contribute to the literature IFRS by providing preliminary evidence on the extent to which reporting incentives play an important role in IFRS compliance and the economic benefit of IFRS compliance in a developing country where enforcement is weak.
Methodologies
The author investigates various articles through qualitative analysis of restricted data from a single developing country Kenya hence the reader is advised to interpret the findings by Lin with caution.
Results
The results by Lin indicate that the mandatory IFRS adoption can provide economic benefits to firms in low enforcement countries, provided firms have the economic incentives to achieve a higher level of IFRS compliance. The conclusion is based on the fact that Kenya is an open capital economy (Lin, 2012).
Does compulsory implementation of IFRS enhance bookkeeping excellence? (Anwer Ahmed and Dechun Wang)
Aims
The article aims to study the effects of compulsory IFRS implementation on 3 sets of bookkeeping excellence metric. These are revenue levelling, recording eagerness, and remunerations controlling to satisfy or beat an objective.
Methodologies
The authors’ methodology employs a benchmark sample and uses a difference-in-differences design.
Results
The authors’ results indicate that 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 (Ahmed and Wang, 2013).
Credit danger and IFRS: The example of credit evasion trades (Gauri Bhat and Dan Segal)
Aims
The objective of the article is to investigate the evaluation of credit danger data transmitted by bookkeeping figures in view of IFRS comparative to domestic GAAP.
Methodologies
The authors utilise a ‘difference-in-differences approach. They found that while remunerations, record worth, and, to a smaller degree, controls are noteworthy factors of loan risk assessing both before and upon IFRS implementation. The implementation of IFRS does not alter the loan risk information of the bookkeeping features as replicated in CDSs.
Results
The results indicate that earnings, book value, and, to a lesser extent, leverage are significant pricing determinants of credit risk both pre- and post-IFRS. However, the adoption of IFRS did not change the overall credit risk informativeness of these three accounting metrics (Bhat and Sega, 2013).
The impact of firm characteristics on trading volume reaction to the earnings reconciliation from IFRS to U.S. GAAP (Lucy Chen and Heibatollah Sami)
Aims
The authors aimed at showing that stockholders in United States businesses conduct business on the remunerations settlement from IAS to United States. They aimed at investigating if the response is contingent on first-time IFRS managers and organisations implementing IFRS as directed by the IASB.
Methodologies
The authors utilise previous works in addition to the development of their own hypotheses.
Results
The results show that only a subsection of organisations, particularly first-time IFRS managers with little official proprietorship, undergo business volume responses to the remunerations settlement.
IFRS 6: Exploration for and evaluation of mineral assets
Summary: The standard allows companies that are new in using the International Financial Reporting Standards regarding exploration and evaluation of mineral assets. The standard sets down rules to be followed when reporting on exploration and evaluation of mineral assets.
Definition: Exploration for and evaluation of mineral assets refers to the searching of mineral reserves upon the interested party obtaining legal privileges to explore.
Objective: It allows the development of bookkeeping policies that recognise the exploring and evaluating of expenditures as assets devoid of the consideration of paragraphs 11 and 12 of IAS 8.
Scope: IFRS 6 only amends the implementation of IAS 36 Impairment of Assets to exploring and evaluating resources acknowledged by an interested party
References
Ahmed, Anwer and Wang, Dechun, “2013”, Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence, Contemporary Accounting Research, Web.
Bhat, Gauri, and Segal, Dan, “2013”, Credit risk and IFRS: The case of credit default swaps, Journal of Accounting, Auditing & Finance, Web.
Chen, Lucy and Sami, Heibatollah, “2013”, The impact of firm characteristics on trading volume reaction to the earnings reconciliation from IFRS to U.S. GAAP, Contemporary Accounting Research, Web.
Horton, Joanne and Serafeim, Loanna, “2013”, Does mandatory IFRS adoption improve the information environment?, Contemporary Accounting Research, Web.
Lin, Steve, “2012”, The determinants and consequences of heterogeneous IFRS compliance levels following mandatory IFRS adoption: Evidence from a developing country, Journal of International Accounting Research, Web.