The main content of this paper is to introduce IFRS adoption, its impact on accounting quality, and why IFRS adoption has different effects on accounting quality for different countries.
- Background to IFRS and IFRS Adoption
This part mainly discusses how IFRS came from and why we should adopt IFRS. (It was originally started in Europe in order to facilitate the understanding of the financial status of various companies. One of the purposes of IAB to establish IFRS is to improve the quality of accounting, but this is not the purpose of IFRS adoption)
- Accounting quality
(1) Discuss accounting quality. For different report users, the definition and meaning of accounting quality are different, and it is difficult to find a unified standard.
(2) Comparability is a way to define accounting quality
(3) (There should be other features, such as whether the accounting statements can truly and comprehensively show the company’s operations)
(4) Indicators of accounting quality used in the research (timely loss recognition, earning management, and value relevance.)
- Examples of IFRS adoption
(1) The situation of IFRS adoption in recent years, and what research scholars have made on IFRS adoption
(2) The impact of IFRS adoption on accounting quality in the case study
Some research results indicate that IFRS adoption can improve accounting quality
Some research results indicate that there is no evidence that IFRS adoption can improve accounting quality
Some research results indicate that for research in the same country, due to the difference in other factors, some studies believe that IFRS can improve accounting quality, while some studies believe that IFRS cannot improve accounting quality.
(3) Reasons for different results (factors affecting the impact of IFRS adoption on accounting quality) (this part is the focus of analysis) (ABCD requires literature support)
- Is the country itself a common law or a code law. (The characteristics of these two countries, the origin of IFRS, and the different application processes of IFRS in these two countries will lead to different results)
IFRS is based on the market (capital market base) standard, which protects the relevant interests of investors (investor/shareholders). For code low countries (such as Germany and France), the transition process is more difficult, because the original local rule was that in addition to protecting investors, other members’ related interests, such as employment and employees, should also be considered. For common law countries, IFRS adoption may be smoother.
- Mandatory adoption or voluntary adoption. Companies have different motivations for adopting IFRS
In countries and regions where adoption is mandatory, for some companies that are about to die, they may be reluctant to adopt IFRS, which easily exposes the status quo of the company. This motivation makes IFRS adoption lower the accounting quality. Moreover, if capital resources are relatively concentrated in some countries, such as the state or central bank control, then companies in this country may not need to attract overseas investment, because the use of IFRS requires costs. At this time, the adoption of IFRS will also have side effects on improving accounting quality. For companies engaged in import and export trade, these companies have greater motivation to adopt IFRS, which is more conducive to improving the quality of accounting.
- The strength of legal restraint. Some countries have stronger laws that force companies to accept IFRS, and some countries have weaker laws and companies will refuse to accept IFRS.
- The intensity of government control, China is relatively tough, like some countries in Latin America, the government control is not so strong, then adoption may not be successful.