{"title":"IFRS Adoption Approaches and Accounting Quality","authors":"J. Agana, Solomon George Zori, Anna Alon","doi":"10.1142/s1094406023500099","DOIUrl":null,"url":null,"abstract":"Synopsis The research problem This paper sought to ascertain whether IFRS adoption approaches impact accounting quality. Specifically, as some countries utilize IFRS without modifications while others modify IFRS to suit their local context, we aimed to test whether these differences in IFRS adoption approaches have implications for accounting quality. Motivation Prior studies focused on the impact of IFRS adoption on accounting quality without considering the different approaches used by the adopting jurisdictions. Such differences affect the version of IFRS utilized at the country level. We refer to jurisdictions as adopters of IFRS when the IASB’s version of IFRS is utilized without modifications. In contrast, jurisdictions where the IFRS standards are modified at the national or regional level are called adapters. We also recognize the role of enforcement; thus, we first examined whether IFRS adoption and enforcement influence accounting quality. Second, we compared the accounting quality for adopters and adapters of the standards. The test hypotheses Our first hypothesis is that the quality of enforcement has a stronger effect on accounting quality than the adoption of IFRS. Second, adapters will have higher accounting quality than adopters of IFRS. Target population We focused on the reporting of companies in African countries. These jurisdictions have not been sufficiently examined in prior studies. Adopted methodology We use panel data estimation, specifically, random-effects model. Analyses We examined accounting quality for pre- and post-IFRS reporting based on 3946 firm-year observations from six African countries over 18 years. Our analysis of the adoption approach is based on 3736 firm-year observations for companies utilizing IFRS. Except for Egypt, which used a modified version of IFRS, other countries in our sample utilized the IASB’s version of IFRS. Using various standard metrics for accounting quality (earnings management, timely loss recognition, and value relevance), we ascertained whether adaption is associated with higher accounting quality compared to adoption. Findings The results indicate that IFRS adoption and enforcement proxy are not associated with accounting quality, but other institutional factors are. Adoption of the standards is less important for accounting quality than the existing institutions. With regard to the adoption approach used, adopters demonstrated higher accounting quality for accounting-based measures, less income smoothing, and more timely loss recognition than the adapters. The adopters also exhibited greater value relevance, which suggests that their reporting was better able to capture information that affects firm value. The adoption approaches may influence different dimensions of accounting quality, and the resulting differences are important for users, companies, and standard setters to consider.","PeriodicalId":47122,"journal":{"name":"International Journal of Accounting","volume":null,"pages":null},"PeriodicalIF":2.0000,"publicationDate":"2023-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/s1094406023500099","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Synopsis The research problem This paper sought to ascertain whether IFRS adoption approaches impact accounting quality. Specifically, as some countries utilize IFRS without modifications while others modify IFRS to suit their local context, we aimed to test whether these differences in IFRS adoption approaches have implications for accounting quality. Motivation Prior studies focused on the impact of IFRS adoption on accounting quality without considering the different approaches used by the adopting jurisdictions. Such differences affect the version of IFRS utilized at the country level. We refer to jurisdictions as adopters of IFRS when the IASB’s version of IFRS is utilized without modifications. In contrast, jurisdictions where the IFRS standards are modified at the national or regional level are called adapters. We also recognize the role of enforcement; thus, we first examined whether IFRS adoption and enforcement influence accounting quality. Second, we compared the accounting quality for adopters and adapters of the standards. The test hypotheses Our first hypothesis is that the quality of enforcement has a stronger effect on accounting quality than the adoption of IFRS. Second, adapters will have higher accounting quality than adopters of IFRS. Target population We focused on the reporting of companies in African countries. These jurisdictions have not been sufficiently examined in prior studies. Adopted methodology We use panel data estimation, specifically, random-effects model. Analyses We examined accounting quality for pre- and post-IFRS reporting based on 3946 firm-year observations from six African countries over 18 years. Our analysis of the adoption approach is based on 3736 firm-year observations for companies utilizing IFRS. Except for Egypt, which used a modified version of IFRS, other countries in our sample utilized the IASB’s version of IFRS. Using various standard metrics for accounting quality (earnings management, timely loss recognition, and value relevance), we ascertained whether adaption is associated with higher accounting quality compared to adoption. Findings The results indicate that IFRS adoption and enforcement proxy are not associated with accounting quality, but other institutional factors are. Adoption of the standards is less important for accounting quality than the existing institutions. With regard to the adoption approach used, adopters demonstrated higher accounting quality for accounting-based measures, less income smoothing, and more timely loss recognition than the adapters. The adopters also exhibited greater value relevance, which suggests that their reporting was better able to capture information that affects firm value. The adoption approaches may influence different dimensions of accounting quality, and the resulting differences are important for users, companies, and standard setters to consider.
期刊介绍:
The aim of The International Journal of Accounting is to advance the academic and professional understanding of accounting theory, policies and practice from the international perspective and viewpoint. The Journal editorial recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and economic. Thus, the primary criterion for manuscript evaluation is the incremental contribution to international accounting literature and the forces that impact the field. The Journal aims at understanding the present and potential ability of accounting to aid in analyzing and interpreting international economic transactions and the economic consequences of such reporting. These transactions may be within a profit or non-profit environment. The Journal encourages a broad view of the origins and development of accounting with an emphasis on its functions in an increasingly interdependent global economy. The Journal also welcomes manuscripts that help explain current international accounting practices, with related theoretical justifications, and identify criticisms of current policies and practice. Other than occasional commissioned papers or special issues, all the manuscripts published in the Journal are selected by the editors after the normal double-blind refereeing process.