Adoption of IFRS in ASEAN Countries

This assignment discusses the perceived benefits and challenges of adopting International Financial Reporting Standards (IFRS) in ASEAN countries. It examines the role of IAS and IFRS in international accounting standard developments and the convergence of IFRS in ASEAN. The differences in IFRS implementation and the benefits of IFRS adoption are also discussed.

Running Head: FINANCIAL ACCOUNTING THEORY
FINANCIAL ACCOUNTING THEORY
Name of the Student
Name of the University
Author Note

1FINANCIAL ACCOUNTING THEORY
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
IAS and IFRS Role in International Accounting Standard Developments............................2
Convergence of IFRS and Adoption in ASEAN....................................................................3
Differences in IFRS Implementation.....................................................................................6
Conclusions................................................................................................................................7
Reference....................................................................................................................................9

2FINANCIAL ACCOUNTING THEORY
Introduction
This assignment is prepared with the objective of discussing the perceived and
benefits for adopting International Accounting Standards in the Asian Countries. Adoption of
the International Financial reporting Standards sets out procedures, which have to be
followed by the companies in case of their IFRS adoption for the first time that is the basis
for general purpose financial statements preparation. Therefore, this report will discuss the
application of business practices broad knowledge in the diversified context. This report will
examines the perception of the professional accountants in Asian Countries as well as
association of the perceived benefits with International Financial Reporting Standards for
accounting and auditing professions in country where they practice. Moreover, this
assignment will discuss extent of adopting the standards of IFRS or IAS of the accounting
that are supported by the government, state and professionals of local accounting bodies
(Perera and Chand 2015).
Discussion
IAS and IFRS Role in International Accounting Standard Developments
As per Mahesh Joshi, the professionals in accounting in countries such as Singapore,
Indonesia and Malaysia have highly supported IFRS adoption, their opinions does not
significantly differ by the qualifications of professional, their experiences and their training
place. Moreover, the countries have been benefitted from global accounting standards
harmonization (Joshi, Yapa and Kraal 2015). As per Diane Kraal, benefits of IFRS includes
equity cost reduction, increase in foreign investments and stakeholders confidence that has
been eroded by the complexity of the harmonization of the required principles that is based
on the ‘fair value’ (Kraal, Yapa and Joshi 2015).

3FINANCIAL ACCOUNTING THEORY
The major development institutions of financing such as World Bank and the Asian
Development Bank assists ASEAN countries, it is because of the globalized capital markets
developments, mid 1990s Asian Financial crisis and growth of multinational. The creditors
and investors requires for having the reports that are updated as well as the financial
statements, there has been increasingly scrutiny of it by the professional practices of the
countries of ASEAN (Dayanandan et al. 2016). It is because ASEAN countries are in
pressure immensely for the adoption of standards of accounting, which depicts the uniformity
of the standards that is across the borders. IFRS and the local accounting standard
convergence has raised the concerns for the stakeholders especially in having major interests
in ASEAN countries. It becomes problematic for accessing the global market in absence of
the institutionalized set of accounting practices (Gaston and Son 2014). The consolidated
financial statements that are in accordance with the IFRS are prepared by most of listed
companies located in the European Union, New Zealand and Australia. In more than 150
countries, IFRS is adopted as per the International Accounting Standards Board. Formally
during the year 2012, IFRS was being adopted in the countries of ASIAN region, however,
adoption of it has encountered so many issues and challenges by the regulators and the
accounting setters after the adoption of IFRS. In order to reduce the differences of accounting
practices by the countries, the aim is to harmonies the IFRS with that of the local accounting
standards (Zaidi and Paz 2015).
Convergence of IFRS and Adoption in ASEAN
In some of the researches, there has been criticism of applications of unmodified IFRS
in the countries of ASEAN. The extent of accounting harmonization among five countries of
ASEAN has achieved the harmonization of high degree for the measurements in the areas of
consolidated financial statements, marketable securities, long –term investments and the

4FINANCIAL ACCOUNTING THEORY
research and development expenditure (Sharma et al. 2017). Instance of adoption of IFRS in
some of the ASEAN countries are as follows:
 Singapore: The country has the history, which dictates that there was the influence of
the accounting practices of the British to the accounting standards as well as
professional training. In context of the Singapore, IAS was examined for propriety of
the adoption. Singapore has adopted most IFRS as well as some of it was modified
that are known locally as Singapore Financial Reporting Standards. The companies
that are incorporated in Singapore has been allowed to use IFRS that are issued by the
IASB rather than the SFRS, the approval of which is granted by the Accounting as
well as Corporate regulatory authority of the Singapore (Phan 2014). Further, the
incorporated Singapore company that are being listed on the securities exchanges
outside Singapore and the securities exchange in the Singapore are being permitted to
use IFRS that are issued by the IASB that is in case of the requirement of the foreign
securities exchanges for using the IFRS (Ahmed and Ali 2015).
 Malaysia: Before independence, for more than 80 years, this country was under
British rule, the history of which is reflected by its reporting as well as practices of
accounting standards. After emergence in the year 1970s, there was formal alignment
of the accounting standards with IAS. During the year 2006, there was the adoption of
financial reporting standards regime with that of the Malaysian standards (Phang and
Mahzan 2017). There was the requirements of the Malaysian companies for the
implementations of the all FRS. The new accounting framework of Malaysia named
MFRS was approved by MASB. As per the instructions of MASB, each and every
companies has the requirements of the application of the MFRS framework at the
beginning of annual period with the exceptions given to the transitioning entities, in

5FINANCIAL ACCOUNTING THEORY
which the options are given for the continuing old framework of FRS (Wardhani and
Anggraenni 2017).
 Indonesia: During the year 1973, the accounting standards of the Indonesia have
heavily drawn sources of the US as well as Indonesian Accounting Principle
formulated by the IAI that was adopted directly by the AICPA of published materials
in year 1965. The announcements of IAI regarding local accounting standard
convergence with IFRS in the year 2012 (Kusumasari 2016). As per the Indonesian
approach, IFRS adoption is for maintaining national GAAP and gradual converging
with IFRS as much as possible. This country has the objective for providing transition
period of 3-5 years for the new standards as well as gaps minimization between the
effective dates of new IFRS and new Indonesian standards. This country is having the
general approach for the convergence of the IFRS and local standards, which starts
with significant differences minimization, which exists between these two (Suttipun
2014).
IFRS Standard Adoption Benefits
IFRS has so many benefits that are helpful in perceived benefits and costs. Certain
benefits of the IFRS adoption are as follows:
 Adoption of IFRS strengthens the accountability through reducing gap of the
information that exists between providers of capital and people for whom the money
are entrusted. It helps in providing information, which are needed for holding of the
management for the account. IFRS are the most important as well as vital to
regulators for the information that are globally compatible (Ebaid 2016).
 It brings transparency through the international comparability enhancement and the
enhancements of the quality of the financial information by enabling other market

6FINANCIAL ACCOUNTING THEORY
participants and investors for the informed and economic decision making
(Christensen et al. 2015).
 It addresses any challenges that come in the way of application of IFRS, by providing
high level of quality and set of internationally recognized accounting standards that
brings transparency, accountability and financial markets efficiency.
 It contributes towards the economy efficiency by the identifications of the
opportunities and the risks by investors all across world that improves capital
allocations. If the business organization uses trusted and single set of the accounting
standards helps in lowering the cost of capital and costs of international costs (Li and
Yang 2015).
Differences in IFRS Implementation
In spite of the fact that convergence of the accounting standards has certain perceived
benefits, however, it is not free from certain limitations of uniformity rules and practices of
accounting nationally as well as internationally between countries. Following are the
limitations:
 Differences in Taxation system of the country affects choices of accounting, for
example decisions of depreciation and choices of depreciation.
 The forces of the economic and political differences determines as well as influences
financial reporting. It helps in determining the way for the implementations
interpretations of the rules.
 The decision regarding modifications of IFRS before its application in the particular
country may create differences.
 Investors can be misled by believing that there is high quality of financial reporting.

7FINANCIAL ACCOUNTING THEORY
 The level of legitimacy can be brought up by the IFRS of the country’s financial
reporting in spite of the certain limitations of the level of enforcements of the
standards.
 The country that have the requirements of the implementation of standards of high
quality, monitoring and enforcements of IFRS would be disadvantageous.
 Differences may be in implementations, monitoring and the implementations. The
accounting practices uniformity will not be possible without having the international
consistency in the implementations and enforcements of the standards of accounting
(Garanina and Kormiltseva 2014).
Conclusions
Hence, it is concluded from the above analysis that the minimization of the
differences in the accounting practices by the harmonization and convergence will increases
the comparability of practices of the accounting. Further, from the report, it has been
analyzed that ensuring centralization of the ASEAN in the globalized business, speed of trade
of ASEAN, integration with accounting global standards has impacted the standards of
accounting in relation with the countries for the convergence of the local accounting
standards with that of the adoption of IFRS. Moreover, it has been analyzed in the report that
Singapore has much positive outlook for the benefits of the economy after the adoption of
IFRS in comparison with the other countries such as Indonesia and Malaysia. In the
Singapore, the accounting bodies of local and state plays the vital role in IFRS adoption
process. In addition, while adopting convergence of particular country, the association of the
perceived cost and the benefits have to be considered that are in relation to the convergence
of the accounting practices. Hence, it has been found that the single set of the global
accounting standards of the highest quality will not be achieved in case if developing
countries such as Malaysia, Indonesia and other does not only fully adopts the IFRS but

8FINANCIAL ACCOUNTING THEORY
selectively adopts standards, which helps in reflecting the current practices and meeting
national interests.

9FINANCIAL ACCOUNTING THEORY
Reference
Ahmed, K. and Ali, M.J., 2015. Has the harmonisation of accounting practices improved?
Evidence from South Asia. International Journal of Accounting & Information
Management, 23(4), pp.327-348.
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.
Dayanandan, A., Donker, H., Ivanof, M. and Karahan, G., 2016. IFRS and accounting
quality: legal origin, regional, and disclosure impacts. International Journal of Accounting
and Information Management, 24(3), pp.296-316.
Ebaid, I.E.S., 2016. International accounting standards and accounting quality in code-law
countries: The case of Egypt. Journal of Financial Regulation and Compliance, 24(1), pp.41-
59.
Garanina, T.A. and Kormiltseva, P.S., 2014. The effect of International Financial Reporting
Standards (IFRS) adoption on the value relevance of financial reporting: a case of Russia.
In Accounting in Central and Eastern Europe (pp. 27-60). Emerald Group Publishing
Limited.
Gaston, E. and Song, M.I., 2014. Supervisory roles in loan loss provisioning in countries
implementing IFRS (No. 14-170). International Monetary Fund.
Joshi, M., Yapa, P.W.S. and Kraal, D., 2016. IFRS adoption in ASEAN countries:
Perceptions of professional accountants from Singapore, Malaysia and
Indonesia. International Journal of Managerial Finance, 12(2), pp.211-240.

10FINANCIAL ACCOUNTING THEORY
Kraal, D., Yapa, P.W.S. and Joshi, M., 2015. The Adoption of International Accounting
Standard (IAS) 12 Income Taxes: Convergence or Divergence with Local Accounting
Standards in Selected ASEAN Countries?.
Kusumasari, L., 2016. Indonesian Institute of Accountants (IAI) Towards ASEAN Economic
Community (AEC) 2015. Asia Pacific Journal of Accounting and Finance.
Li, X. and Yang, H.I., 2015. Mandatory financial reporting and voluntary disclosure: The
effect of mandatory IFRS adoption on management forecasts. The Accounting Review, 91(3),
pp.933-953.
Perera, D. and Chand, P., 2015. Issues in the adoption of international financial reporting
standards (IFRS) for small and medium-sized enterprises (SMES). Advances in
accounting, 31(1), pp.165-178.
Phan, D., 2014. What factors are perceived to influence consideration of IFRS adoption by
Vietnamese policymakers?. Journal of Contemporary Issues in Business and
Government, 20(1), pp.27-40.
Phang, S.Y. and Mahzan, N., 2017. The responses of Malaysian public listed companies to
the IFRS convergence. Asian Journal of Business and Accounting, 6(1).
Sharma, S., Joshi, M. and Kansal, M., 2017. IFRS adoption challenges in developing
economies: an Indian perspective. Managerial Auditing Journal, 32(4/5), pp.406-426.
Suttipun, M., 2014. The readiness of Thai accounting students for the ASEAN Economic
Community: An exploratory study. Asian Journal of Business and Accounting, 7(2).
Wardhani, R. and Anggraenni, M.D., 2017. The effect of leverage and IFRS convergence on
earnings management through real activities manipulation in Asia. Asian Journal of Business
and Accounting, 10(1), pp.87-125.

11FINANCIAL ACCOUNTING THEORY
Zaidi, S. and Paz, V., 2015. THE IMPACT OF IFRS ADOPTION: A LITERATURE
REVIEW. Journal of Theoretical Accounting Research, 10(2).