International Financial Reporting Standards Adoption and Value Relevance

This assignment provides a comprehensive analysis of the International Financial Reporting Standards (IFRS) adoption and its value relevance in Nigeria. It covers various studies and research papers that examine the impact of IFRS convergence on accounting information, corporate performance, and sustainability disclosure. The assignment also discusses the challenges faced by reporting entities during their transition to IFRS and the unintended consequences of linking tax return disclosures to financial reporting for income taxes.

Running head: INTERNATIONAL FINANCIAL REPORTING
International Financial Reporting
Name of the Student:
Name of the University:
Author’s Note:

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Abstract
The concerned thesis relates to the understanding of international financial reporting and its
impact on the construction of the financial statements. The introduction and the background have
provided a brief idea about accounting standards and how these aspects have developed with the
course of time. The problem statement has explained the issues pertinent to the topic. The
objective of the paper has provided the elements that would be explained in this paper. The
literature has even given an idea about what other past researches have provided on this topic and
the methodology has looked to address the sort of data used and the procedure that has been used
for the collection of the data. The assessment of the collected data is helpful in the explanation of
the objectives and the results in an overview states that objectives of the paper is addressed and
therefore international financial reporting is interrelated with preparation of the financial
statements for the companies all over the globe.

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Table of Contents
Chapter 1: Introduction....................................................................................................................4
1.1 Background of the Study.......................................................................................................4
1.2 Discussion of the Problem Statement....................................................................................6
1.3 Research Aims and Objectives..............................................................................................7
1.4 Research Question.................................................................................................................7
1.5 Research Gap.........................................................................................................................7
Chapter 2: Literature Review...........................................................................................................9
2.1 Introduction............................................................................................................................9
2.2 Meaning of International Financial Standards.......................................................................9
2.3 IFRS Adoption all over the globe........................................................................................10
2.4 The role of the capital markets............................................................................................13
2.5 Importance of financial reporting in the capital markets.....................................................14
2.6 Relevance of IFRS in the emerging capital markets...........................................................16
2.7 Summary of the literature....................................................................................................17
Chapter 3: Research Methodology................................................................................................18
3.1 Introduction..........................................................................................................................18
3.2 Research Philosophy............................................................................................................18
3.3 Research Approach..............................................................................................................18
3.4 Research Design..................................................................................................................19

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3.5 Choice of methodology........................................................................................................20
3.6 Secondary Data....................................................................................................................20
3.7 Data Collection Process.......................................................................................................21
3.8 Data Analysis Plan...............................................................................................................21
3.9 Ethical Consideration...........................................................................................................21
Chapter 4: Data Analysis and Discussion......................................................................................22
4.1 Introduction..........................................................................................................................22
4.2 Accounting Standards as solution to Information Asymmetry Issues.................................22
4.3 Accounting Quality..............................................................................................................23
4.4 Decision Usefulness.............................................................................................................24
4.5 Positive Accounting Theory Approach...............................................................................25
4.6 Discussion............................................................................................................................26
Chapter 5: Conclusion, Recommendation and Future Work.........................................................28
5.1 Conclusion...........................................................................................................................28
5.2 Addressing the objectives....................................................................................................29
5.3 Recommendation.................................................................................................................30
5.4 Future Study.........................................................................................................................30
Reference List................................................................................................................................31
Bibliography..................................................................................................................................39

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Chapter 1: Introduction
In the present time period, there are several companies and industries that are functional
in the global economy. Every company undertake transactions and therefore record their
transactions and other associated interactions in their financial statement. The advent of
globalisation has increased the need for a common reporting standard that would be effective in
the generation of effective financial reporting among the companies and a common financial
statement that would be helpful in the development of the operational activity and the
maintenance of a stable and healthy economy (Lang & Stice-Lawrence, 2015). This paper
therefore has the intention of addressing the impact of international financial reporting in world
especially in the European Union.
1.1 Background of the Study
In the current economy, globalization has been making a dramatic effect on the global
economy and therefore the borders are getting less and the less precise and the trade and the
cooperation among the organizations located in various continents is now very common. It is
seen that more and more organizations have become global in their operational activities and the
international trade with the help of credits and shares is rising constantly. Appiah et al., (2016)
explained that as the organizations and the need for capital have gone out of the countries, capital
internationalization has become essential. The demand for an open financial market is slowly
becoming stronger and therefore is becoming effective. Globalization makes the harmonization
and the comparability of the financial and accounting documenting one of the priorities.
The aim of the various companies has been to generate a free market where goods, capital
services and labour are able to move along independently. The development of common

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currencies in the European countries has led to the development of transparency of the European
market and therefore the companies with the help of this transparency has been able to assess the
opportunities that are available in relation to the business within the economy (Kaya & Koch,
2015). The incorporation of the International Financial Reporting Standards (IFRS) will even
enhance the transparency of the information of the organizations and therefore would even be a
key step in the commitment of the European Union for a general capital market in Europe. For
the lenders and the investors, it is vital to maintain quality and comparable data and this can only
be attained if the nations cooperate among themselves in creating a general process that would be
like IFRS or IAS.
The IASB in an active manner has been promoting the standard that they have
incorporated all over the globe. Chen & Li, (2015) cited that in more than 100 countries globally,
the utilisation of IFRS has permitted or is demanded. It is seen that many of them have
incorporated the special programs for the converging and the transitioning their national
standards in accordance to IFRS.
After the break up that took place with the Soviet Union in the year 1992, Russia had to
transform their economic process from a planned economy towards a market economy. It is seen
that in a command economy, the process of production are in the form of public ownership and
in this case the states take the authority of the economy and the economic operations is looked
upon to respond in accordance to the direction of the state. On the other hand, within a market
economy the process of production are generally in the form of private ownership, the states
generates a legal structure in which the economic operations are undertaken and the economic
activities are regarded to respond to the market forces. These kinds of transitions generally have
a significant consequence on the process accounting which stops to be an instrument of the state

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economic management and thereby becomes equipment at the disposal of the business society
(Kim et al., 2014).
There are new kind of organizations and firms that are desperate in need of new
accounting standards. In a market economy, the aim of the financial reporting of the
organizations is to provide effective information to the current and the potential investors,
creditors and other parties who are interested in order to facilitate their process of undertaking
decisions (Ali et al., 2016). It is seen that until now, the function and the perception of the
accounting process have transformed in a dramatic manner and the key users of the financial
statements is still the state and the government who are associated with the taxation purposes and
the related departments (Abdullah et al., 2017). It is seen that the suggestions of the other parties
like the creditors, managers and the other associated personnel have become significant in the
current time period. It is due to this factor that the development of the financial standards and
especially the international financial standards has been vital.
1.2 Discussion of the Problem Statement
There has been a rise of the number of organizations that are operational within the
European Union or even outside the Union in the current time period. The incorporation of the
accounting standards is dependent on the external as well as the internal environment of the
concerned companies. It is seen that globalisation has led to the companies being operational all
over the globe (Schneider et al., 2017). Henceforth, the need of international financial reporting
has become vital. Even though it is seen that certain countries may face issues in accordance to
the incorporation of these standards as there may be issues and problems. The incorporation of
these standards have positive and negative effects and therefore assessment of the same needs to

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be done in order to have an understanding of the changes that would be made with the help of
which these standards can be enhanced.
1.3 Research Aims and Objectives
The objectives of the research in accordance to this topic have been explained as follows:
 Assess the impact of International Financial Reporting Standards on the financial
statement of the companies
 Assess how International Financial Reporting Standards help in mitigating the challenges
faced by the individuals constructing the financial reports of an organization
1.4 Research Question
The research question in accordance to this paper is:
Q1. How will International Financial Reporting Standards (IFRS) have an impact on the
financial reports constructed by an organization?
Q2. How does International Financial Reporting Standards (IFRS) help in mitigating the
challenges faced by the individuals constructing the financial reports of an organization?
1.5 Research Gap
The research gap relates to the limitations that is seen in association to this topic, which
earlier researchers have been unable discover. In accordance to this topic, the literature that is
based on accounting establishes a debate in relation to the success of the incorporation of
International Financial Reporting, their relationship with the accounting standards and in this
manner may create issues if it is seen that the accounting statement of the companies are not in
compliance to the available standards (Christiaens et al., 2015). It is seen that there have been
very limited researches based on this topic and therefore their impact and the positives and

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negatives in relation to this topic is not known in a proper manner. This has compelled in the
construction of this paper with the help of which an idea can be attained and thereby
international financial reporting and how it can be utilised by the economy as well as the
companies would be known in an effective manner and thereby better incorporation of the same
can be done at any future course of time.

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Chapter 2: Literature Review
2.1 Introduction
Chapter 2 of a thesis paper addresses several research paper and literatures that have been
published by the other researchers and authors. There are numerous aspects that have been
addressed by previous researchers and authors and explanations have been given in accordance
to the several sorts of standards that are already available in the economy. These definitions and
explanations provide an insight with the help of which the companies would be able to
understand the significance of these standards and thereby would even be able to enhance the
operational activities as well as construction of the financial statements (Mao & Wu, 2018).
Hence, it is seen that the literature review has the idea of providing effective insight and
information in accordance to what other researchers have suggested with the help of which new
and improved idea on this topic can be attained.
2.2 Meaning of International Financial Standards
Accounting standards are regarded to the rules, conventions and regulations that direct
the construction of the financial documents and the financial statements. Accounting standards is
looked upon to be the basis for the construction and the auditing of the annual report of the
companies. The accounting standards are constructed on the basis of the conceptual model and in
the scenario of IASB; it has been the due process. Conceptual model for the construction of the
account has been explained as a constitution, which is the basis for the creation of the accounting
standards. Conceptual model are constructed in order to direct the standard creators to make sure
stable and sustainability is maintained in the issuance of the future standards and as a direction
for the incorporation of the accounting issues in scenarios where there are absence of any sort of
accounting standards (Haslam et al., 2016). This model addresses the elements in the financial

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reports, how they have been discovered, assessed and published which serve as a point of
reference towards the management in scenarios where there is absence of the accounting
standards. The model is not an accounting standard itself. In scenarios, where is a conflict among
the specific standards and the model, the explanation of the standards of accounting surpasses the
conceptual model (Balsmeier & Vanhaverbeke, 2018).
The construction of the accounting standards goes through numerous stages prior to being
published. The procedure within which a project goes through before it is finally sanctioned or it
is rejected with the help of the due process is known to be the Due Process. This process permits
the groups who are interested to take part in the process of setting standards with the help of the
submission of the comments (Adeyemo et al., 2017). In spite of the democratic characteristic of
the process of setting standards, previous documents related to the research has extensive amount
of lobbying in the process of constructing the standards.
International Financial Reporting Standards (IFRS) are constructed and is issued by the
IASB. The standards that are disclosed by the IASC are known as International Accounting
Standards (IAS). IFRS has both broad and narrow meaning. In the narrow aspect, IFRS is known
to be the set of the new standards that is issued by the IASB that is variable from the past
standards (Ward & Lowe, 2017).
2.3 IFRS Adoption all over the globe
IFRS has attained acceptance as an individual set of the standards of financial reporting
in countries all over the globe. Cho et al., (2015) explains that capital market globalization have
created the demand to scrap the domestic standards in the favour of the international benchmarks
and standards that have been attributed in the incorporation of IFRS as an individual set of the
worldwide standards of accounting as the precise example from this end. Chen et al., (2018) has

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expressed that more than 100 nations have incorporated IFRS for the purpose of financial
reporting but there are other countries to have agreed upon to implement or converge to IFRS.
European Union has mandated all the companies that are listed with them to disclose
financial reports with the utilisation of IFRS. This is even applicable to the new countries as well
who would be admitted to the membership of the European Union (Weaver & Woods, 2015).
The development has made the EU to the biggest customer of the IASB as it is seen many
nations have not taken the same kind of initiative. It is seen that even though IFRS is compulsory
for all the listed organizations within EU, it is seen that the Union does not publish a blanket
implementation of the standards that have been published by the IASB. The Accounting
Regulatory Committee (ARC) that is within the European Commission needs to endorse these
standards prior to becoming applicable within the European Union (Jin et al., 2015). This process
of endorsement confers with the political power IASB over the European Union for the time
being, this power would diminish of the biggest capital market of the globe gradually
implements the IASB standards, which has initiated with the elimination of the requirement of
reconciliation for the issuers who disclose the financial statements that is reliant on IFRS.
It is seen that United States is one of the countries that has taken huge step by combining
the US GAAP with the International Accounting Standard Boards. The SEC of USA has
eliminated the needs which ensure that the issuers who are foreign who document based on the
IFRS need to reconcile their financial reports in accordance to USA. The SEC of USA has
created seven milestones that need to be attained in order for the SEC to ascertain whether IFRS
needs to be compulsory for the issuers from US in their documentation with the SEC.
The procedure towards a uniform or single standards of accounting comes in the form of
various shapes and forms. The most minimum and the less expensive types of all the procedures

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are known to be the informed deliberation and Poudel et al., (2014) explained that informed
deliberation is associated to the undertaking of the efforts that are active in nature in order to
assess the international standards and the standards that are associated to the other countries that
have been constructed when creating the standards related to similar issues. This even looks to
stay abreast of the international enhancements and is even inclusive of the materials in the
international viewpoint and the enhancements in the explaining materials along with the
materials for the associated issues that have been under the deliberation. It is seen that IASB has
taken similar position when undertaking the decision regarding which item to insert within the
agenda (Crawford et al., 2014). The IASB takes consultation from the other nation based
accounting standards in order to attain the insight into the present development and the threats
and the challenges that are faced by the national standard creator when creating similar kinds of
standards. This will assist the IAB to attain the convergence of their standards with the other
national standards, which has been the aim of the IASB and their ancestors.
Implementation is another process towards the individual usage of the standard of
accounting for the purpose of documentation all over the globe. With the process of
implementation, several countries specially the ones from the developing capital market makes
use of IFRS that has been constructed by IASB and thereby improve them in order to enhance
them in order to suit the needs of financial reporting (Ali et al., 2016).
The other process that is towards an individual set of accounting standards is known to be
harmonization. In this aspect, harmonization of international accounting, which in some cases is
sometimes confused with convergence and is the elimination of the various practices and their
alternatives among the local standards and the international accounting standards in order to
bring out the financial outcomes, which are compatible but is not similar to one another. The

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process of harmonization of the standards of accounting estimates that one standard is the
suitable standards while the other accounting standard sets generally perceived to be very weak
and thereby is brought into agreement with the suitable standards. Mantzari et al., (2017)
explained that harmonization as a determination, which aims at combining together two different
systems of accounting in order to attain a synergetic impact. The accounting standard
harmonization assists the organizations to transfer to overall implementation of IFRS with
minimum amount of cost and the issues due to the national standards that in some way is similar
to IASB.
2.4 The role of the capital markets
The capital market of any country provides a channel with the help of which the long
term and the funds that are medium term in nature are available to the companies, international
firms, government and the government based agencies. Capital market can be segmented into
debt and equity market. These two markets can be further segmented to primary and secondary
markets. Equity capital markets permits any organization the benefit to increase their capital
from the investors with the help of the issuance of the shares of the organization. The investors
thereafter become portion owners of the organization and are even known to be the residual
claimers at the time of liquidation (Tschopp & Huefner, 2015). The investors who undertake
investment in the debt markets are not known to be the owners but are the external claimers on
the asset of the companies and therefore are even entitled to attain frequent payment of interest
from the companies where investments have been made.
The advent of globalisation in the capital market has provided the firms with the
opportunity to decide the area from which the capital can be raised in order to finance the
investment projects. This kind of flexibility diminishes the cost of capital to the firms as they are

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able to take the benefit of the competitive extent of the equity and the issues of debts, which may
not be possible when the organizations are limited to only one capital market (Crawford et al.,
2018). The capital market creates an opportunity with the help of which the ownership and the
wealth of a country can be distributed among the people of the country.
Capital markets even provide the channel with the help of which the secondary process of
trading of the shares of the organization can have an impact. The investors who are in no longer
in the need of their securities are provided with the platform with the help of the mechanism of
the capital market to marshal them off the investors who are new (Leuz & Wysocki, 2016). It is
seen that capital market are helpful in providing liquidity to the shares of the organizations.
Capital market even serves to be the platform for the company valuation due to the fact that it
replicates the organizational performance especially in the capital that discloses the features of
semi-strong effectiveness.
2.5 Importance of financial reporting in the capital markets
The companies are established by the community and hence are responsible to the ones
who are known to be the stakeholders. The stakeholders are considered to be the bankers,
investors, employees, competitors, government and any other associated members. The
stakeholders are in need of various kinds of financial data in order to aid various kinds of
purposes.
Corporate data can be attained from several kinds of sources. These are inclusive of and
are not restricted to the information like the annual reports, discussions of the management,
assessment of the reports and other kind of information. Chao et al., (2015) explained that
financial annual reports have a significant role to play in the process of disclosure of the
organizations due to their extensive level of circulation.

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Mullinova & Simonyants, (2016) cites that information that are given out by the annual
report is utilised to legitimate the activities of the companies by their management. It is even
seen that the developing capital markets, the annual report is the only source of the corporate
data that is available to several kinds of stakeholders.
Financial data are utilised by the stakeholders for the purpose of decisions related to the
investment, recommendation purpose and the combined bargaining contract of the employees,
evaluating the liquidity as well as the solvency of the organizations. The provision in relation to
the financial reports by the company management is by any means the most significant element
in performing the function of stewardship to the stakeholders.
Financial data even has an essential role to play at the macro and the micro level within
an economy. It has been recommended that financial data plays a significant role in making sure
that the resources are assigned in an effective way in the capital market and assists the
government to generate funds like the sovereign bonds in order to enhance the projects that are
underdeveloped (Haslam, 2017).
It is seen that at the micro level, the corporate financial data assists in mitigating the
uncertainties that are seen in the market and thereby restricts any kind of financial crisis. The
publishing of the financial data eliminates the chances of any market crash and restricts
segmentation of the capital markets (Hales, 2018). Furthermore, the process of financial
reporting gives out precise information to the investors in order to ascertain the flow of the
organizations. Corporate data as published in the annual reports assists the investors to evaluate
the profitability of the investment undertaken in order to take the decision in regards to whether
to sell, hold or purchase the shares. The valuation of the business is even possible with the help
of the financial documenting information.

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2.6 Relevance of IFRS in the emerging capital markets
The globalisation of the emerging capital markets as an outcome of the foreign capital
inflows has generated the demands for increased quality of financial reporting as it would act as
the only source of data for the domestic and the international investors. Uwuigbe et al., (2017)
cited that even due to the increased significance of the emerging capital markets in the
international capital markets, most of the firms are medium or small and the quantity of trade and
the difficulty of the transactions do not have an impact on the improved capital markets. It is due
to this fact that a debate has been created whether IFRS, which is reliant in the negotiation
amount the principles of accounting that is seen in USA and UK, which should be implied in the
emerging capital markets.
The standards of IASB is a standard that fits one at all, which explains that all the firms
within the jurisdiction needs to comply to the standards in an equivalent manner. This has
created an argument in accordance to the preciseness and the effectiveness of the IASB standards
in the emerging capital markets. The aim of the IASB has been to generate improved quality of
the individual accounting standards that is to be utilised for the purpose of documenting all over
the globe. Beckman, (2016) advices that the applicability of IAS throughout the globe is reliant
on the debate that the intrinsic features of the economic transactions are similar in both in regards
to the developed and the developing capital markets, which needs that the disclosure and the
assessment of the accounting transactions are not in need of various kinds of treatment.
Conversely, Marin, (2017) opposes that the IASC has the desire to legitimise and justify the
presence of the standards and therefore the situation that their standards are equivalently precise
to the emerging capital markets and the matured and developed capital markets. The debate that

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has been taken into consideration is not appropriate as the IASB can still construct a standard
that is ideal for a specific jurisdiction and thereby attain the level of legitimacy.
2.7 Summary of the literature
The literature that has been constructed for this paper has tried to assess the researches
and the journals that have been constructed by the other researchers in association to
international financial reporting with the help of which an understanding can be developed with
the help of which how the standards have improved with the advent of time and how it has been
able to enhance the operational activities of the companies can be understood. The aspect related
to the capital market and how the emergence of the capital market has been helpful in the
increase in the funds can be helpful in increasing the fund and thereby better projects can be
initiated by the companies.

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Chapter 3: Research Methodology
3.1 Introduction
The methodology in association to this paper will be constructed with the help of which
the researcher would disclose the kind of data that would be collected for the purpose of
analysing the data and thereby fruitful results can be attained with the help of which the
conclusion of the paper can be completed. The researcher has looked to identify the process that
would be used with the help of which the data gathering process can be undertaken. The
approach, design and the philosophy that would be used in order to understand the guideline that
would be used would be assessed with the help of which effective results can be attained.
3.2 Research Philosophy
The researcher has to select the philosophy with the help of which the ideology in order
to attain the data would be collected and thereby evaluation process would move forward in
order to attain the research objectives. The philosophy determines the source and the nature of
the data that would be gathered with the help of which outcome in relation to the topic can be
attained. There are three kinds of philosophies that can be exploited by the researcher and each
one of them are realism, positivism and interpretivism (Kastrati, 2017). However, the researcher
in accordance to the topic that has been international financial reporting has chosen realism
philosophy mainly due to the fact that the understanding of the topic and the associated aspects
would be understood. Realism philosophy can be selected for the quantitative analysis and
qualitative analysis and therefore would be ideal for this research.

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3.3 Research Approach
It is vital for the researcher to understand approach that would be selected for the purpose
of the study so that effective and precise data collection can be undertaken. The approach
determines the framework and the theories that would be applied with the help of which the
researcher can move ahead with the collection of the data and thereby effective means of
assessment process would be understood. There are two sorts of approaches that the researcher
can make use of and they are deductive and inductive approaches. The current topic associates
with understanding the impact of international financial reporting in the entire globe and as
secondary data would be used for the purpose of analysis; the researcher has chosen deductive
approach (Frias‐Aceituno et al., 2014). This is essentially due to the fact that deductive approach
associates with the use of frameworks and theories that have been utilised in the past by the other
researchers. The current topic tries to assess the impact of international financial reporting and
therefore has applied theories and modules that are already existent in order to gather the data
and thereby fruitful and precise results can be achieved.
3.4 Research Design
The preciseness and the efficiency of the sort of research is reliant on the research design
that is made use in this paper. The efficiency of the research supports in the evaluation and
thereafter the interpretation of the information in a precise way. The researcher has discovered
that there are three sorts of designs that are available to them and it is in their discretion to select
the design in relation to the concerned topic. The three designs are exploratory, descriptive and
explanatory research designs (Persons, 2014). In this paper, the researcher has chosen descriptive
research design mainly due to the fact that in this paper extensive and descriptive assessment
would be done with the help of which effective and fruitful results would be attained. The

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research would extensively define the various elements related to the standards of accounting
and the processes that are used for the purpose of reporting the financial statements. In this
manner, descriptive research design is ideal mainly due to the fact that the explanation provided
in the thesis would be helpful in creating conclusive evidence about the efficiency and the
validity of the outcome.
3.5 Choice of methodology
The methodology ascertains the sort of data that would be collected by the researcher in
order to have an understanding of the effective outcome. The researcher in this paper has
considered qualitative data as it is seen that data from several secondary sources would be
determined with the help of which the effectiveness of the standards as well as the development
of the financial reports with the help of these standards can be understood in a positive way. The
qualitative data assists in the preparation of a thematic analysis with the help of which the
researcher would be able to understand the impact of international financial reporting.
3.6 Secondary Data
The topic that is selected for this thesis understands the impact of financial reporting. The
data that would be selected for this topic is not available with the help of the primary data. It is
seen that primary data tries to collect data from the selected respondents and therefore their
opinions and feedback will not be ideal for the attainment of the data in accordance to this topic.
It is due to this fact that secondary data is collected by the researcher and therefore data would be
collected from numerous internet websites where information in relation to the international
financial standards has been mentioned. Data in relation to this topic is even available in several
books and accounting journals and therefore these resources have even been used in order to
have a clear and valid understanding of the topic of the paper (Marzuki & Wahab, 2016). The

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researcher has even made use of electronic journals and the press releases that have been made
by different countries and the global bodies based on the internally acclaimed financial standards
in order to recognise the aspects and the mind-sets that are thought to be existent in relation to
this topic. Secondary data is helpful in the preparation of the data assessment process and thereby
the researcher would be able to achieve the conclusion of the paper.
3.7 Data Collection Process
The mode with the help of which the researcher is able to obtain the data has to be
mentioned as well. It is seen that in this thesis, the researcher has collected the data by assessing
several sources of the data and thereafter discovering which have been the most effective sources
that would be helpful in the determination of the desired outcome of the paper. The collection
process and the efficiency level of the process is useful for the attainment of the results that
would lead to understanding of the topic.
3.8 Data Analysis Plan
The analysis of the data would be done with the help of well-designed plan and thereafter
assessment of the same would be done. The researcher would undertake thematic analysis so that
all the elements and the aspects of the data would be evaluated and explicit explanation would be
done in order to attain the results that are desired from the perspective of the researcher. The
analysis of the data would be done and with the help of the thematic assessment effective and
valid results can be attained.
3.9 Ethical Consideration
The researcher has the job of maintaining ethics during the time of the evaluation of the
construction of the paper as the ethical bodies have addressed the fact that morale and ethics
need to be maintained in order to publish precise data (Coetzee et al., 2016). The researcher

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therefore has maintained ethics in this paper and therefore has collected the data from true and
valid sources so that the data that is utilised for the purpose of analysis will be authentic and
thereby motivate the reader to make use of the data for future references.

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Chapter 4: Data Analysis and Discussion
4.1 Introduction
This section of the paper would provide evaluation of the data with the help of which the
researcher would be able to attain the impact of the international financial reports. The analysis is
done with the help of which precise results can be attained and thereby the effectiveness of the
financial standards can be understood in a precise manner.
4.2 Accounting Standards as solution to Information Asymmetry Issues
The policy makers and the researcher have found several ways in order to rectify and
resolve information asymmetry issues. For the adverse selection issues, optimal agreements
among the investors and the owners, that would provide remuneration for the overall disclosure
of the private data and thereby mitigating the mis-valuation of the issues. Conversely, it is seen
that no agreement would be able to take care of all the probable transformations that takes place
in the progress and as a matter of fact, optimal agreements which cannot entirely safeguard the
outsiders in the current time period. The other probable solution to the data asymmetry issue is
the regulation that needs the managers to entirely reveal their private data (Swait et al., 2018). It
is due to the issue that there exists a demand for the data intermediaries, like the financial
researchers and the rating companies who are associated in the private data production in order
to reveal the superior data of the managers. For the purpose of the moral hazard issues, the
optimal agreements among the investors (Li & Yang, 2015) and the entrepreneurs like the
contracts and the compensation look to align with the interests of the owners with the ones that is
of the external equities and the debt claimants. These agreements on a regular basis need the
owners to publish the precise data that assists the investors to look into the compliance with the

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contractual contracts and to assess whether the owners have been able to manage the resources of
the companies in accordance to the interests of the external entrepreneurs.
In order to assess these answers, initially from the process of the adversative selection of
the information asymmetry that addresses that the other stakeholders and even the investors have
inadequate data when constructing and creating agreements that are negotiating in nature with
the managers (Eng et al., 2014). The second from the point of view of the moral hazard, it is seen
that the stakeholders are in need of the data in accordance to the performance of the transactions
in order to assess and supervise the manager’s performance and other agreement parties. Hence,
the quality of the accounting becomes the foundation of undertaking decisions related to the
investment and the construction of several agreements among the stakeholders and the firm.
4.3 Accounting Quality
There are generally two elements that are considered that is related to the quality of
accounting. The first element is in respect to the reliability, which refers to effectively reveal the
present operational performance and the second aspect is the relevance of the value, which is to
assist the accounting data users in effectively estimating the future performance of the
operations. IASB has precisely explained the relevance and the reliability to be most significant
elements of the quality of accounting in their conceptual model. Phan et al., (2018) explained
that in order to validate the effectiveness of the answers one of the essential condition has been
that accounting numbers are of the quality in such a manner that the investors have discovered
that the accounting numbers are effective when assessing the performance of an organization and
the stakeholders and therefore construct agreements on this and assess the performance of the
company on the aspect of the loyalty of the accounting numbers. It is seen that the accounting
numbers that are useful in providing the measurement of the performance, when it is seen that

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the investors and the other associated parties have been monitoring. In addition, the accounting
numbers acts as the base data when the stakeholders of a company construct and negotiate the
agreements (Rand & Nassar, 2017).
4.4 Decision Usefulness
Muniraju & Ganesh, (2016) explained that the market is effective enough and the
effectiveness of the decision debates that the meaning of accounting data is to give out
effectiveness in the process of undertaking decisions. This explains that the setters of the
accounting data have to take the decision of the level of effectiveness they would look to reveal
by looking into the rules of accounting.
The academic and the professional agents have assisted the concept of decision
usefulness. IASB has explained that the vital aim so as to prepare in the interests of the public, an
individual set of the increased quality, enforceable and understandable worldwide standards of
accounting that are in need of highest quality, comparable and transparent data in the financial
reports and the other financial documenting in order to assist the participants in the global capital
markets and other users in order to undertake economic decisions (Yusrina et al., 2017).
In relation to the aspect of usefulness, it is seen that the first question is to whom that the
data is effective. Ugochukwu & Martin, (2015) addressed the fact that the accounting standards
are accountable for the quality of the earnings and the quality of the other accounting data in
regards to the fact that the investors think that the data are effective for the purpose of making
decisions. Hence, the discussion of the decision usefulness is from the point of view of the
investors inclusive of the debtors, shareholders and other investors.

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4.5 Positive Accounting Theory Approach
The decision usefulness addresses the accounting policies to be like a black box, while
the key judgment is given to the investors within the market. Conversely, it is seen that the
theory of positive accounting assesses the quality of accounting in such a manner that would take
more constituencies within the consideration that are inclusive of the creditors, regulators,
managers etc. the enhancement of the theory of positive accounting is dependent on the idea of
economic consequences. Barth, (2015) debated that the accounting numbers are not only the
replication of the economic operations, they could have an impact on the actual value of the
companies. Park & Scaria, (2017) explains that the company being a nexus of the agreements,
where it is seen that accounting numbers act as a base for the agreement as all the parties within
the agreements have the access to the accounting of the numbers. It is seen that there is
asymmetry of the information among the agreeing parties and the parties who are opportunistic
and are self-serving, the need of the authentic accounting information increases.
The theory of positive accounting has recognised the three key agreements that have an
impact of the choices of the policies of accounting. The initial aspect has been the compensation
of the management. Information asymmetry among the managers and the shareholders can
increase the demand for the information by the owners as due to the fact that the managers can in
a potential manner pursue their individual benefit by supervision of the accounting data (Yahaya
et al., 2015). Hence, the investors need to assess the managers in order to make sure that the
managers are performing in accordance to the interests of the investors. The second key kind of
contract has been debt covenants. The factor has been that rise in the increased earnings would
diminish the default probability. The borrowers need to satisfy certain financial needs like the
leverage, interest coverage; working capital etc or else the creditors would levy penalties, which

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may put the company in extreme financial issues. The third kind has been the political expenses.
The companies that have increased amount of profitability are generally followed by the
researchers and the media, which addresses the probable additional supervision, additional
regulation and more needs from the government like the fall in unemployment and new tax and
hence the companies would look to defer the earnings that are attained at the present time to the
tomorrow (Aryani & Suhardjanto, 2016).
In addition to the extensive kinds of agreements, the other contracting parties like the
employee, debt holders and the regulators are even in need of the earnings which would act as an
indicator of the performance of the companies in evaluating the risks and estimating the
performance. Flower, (2015) explains agreements as relational agreements that come from the
sustainable relationships among the stakeholders and the companies and acts as a representation
of the estimated attitude of the previous dealings related to the business. This perception of
agreement implies that formal agreement is only found to be one source of the demand of the
dependable accounting data (Hsu, 2017). On the other hand, the stakeholders need the
accounting data to attain the harmony or negotiate the issues and the basis of the agreements that
could be written formally or could be informally implicitly agreed upon by the parties that are
involved.
4.6 Discussion
The assessments that have been made in accordance to the accounting standards and the
elements that are related have been able to express the fact that accounting standards have played
a fundamental role in the effective level of construction of the financial statements. This leads to
better relationship among the management of the companies and the investors and the investors
would have a clear view on the performance of the companies. The standards have addressed the

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regulations that have been maintained and therefore the precise and effective results would be
achieved by the companies.

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Chapter 5: Conclusion, Recommendation and Future Work
5.1 Conclusion
The research that has been undertaken has been able to explain the fact that financial
reporting has been developing with the improvements and the changes in the regulations that
have been taking place in the accounting standards. The background of the paper has been able
to explain the development of the accounting standards and how these aspects have been able to
increase the level of financial statements for all the companies. The background even examined
the how accounting standards have developed with the advent of time and thereby changes in the
construction of the financial statements have improved as well. The problem statement has
looked to explain the issues that are existent and the limitations and the issues that had an impact
on the performance of the companies and the construction of their financial statements. This has
been the aspect that would be effective in the construction of the paper with the help of which
aspects can be discovered with the help of which these issues can be resolved at later point of
time.
The literature that has been prepared in this paper has addressed the various suggestions
and the aspects with the help of which the idea has been attained in accordance to the topic. The
literature has tried to explain the various elements and the development of the standards with the
advent of time. The paper has even analysed the impact these standards have on the preparation
of the financial statements and thereby an understanding would be gathered regarding the
effectiveness of the financial reports with the developments in the accounting standards.
The methodology identified that deductive approach would be selected and realism
philosophy is ideal for this thesis paper. Descriptive research design is selected as the paper
would assess the processes and the impact in an explicit manner. Secondary data has been used

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with the help of which information from numerous sources would be used in order to attain the
desired results. The data analysis process has looked to assess the data with the help of thematic
analysis and thereby this paper has been able to discover and achieve the objectives of the paper.
The preciseness and the validity of the results can only be justified once the results are in line
with the objectives and therefore each and every objective would be explained individually.
5.2 Addressing the objectives
The first objective of the paper has been to assess the impact of International Financial
Reporting in the financial statement of the companies. The results that is provided in this paper
explains that International Financial Reporting has significant amount of impact on the
construction of the financial statements as it is seen that enhanced financial statement is
constructed with the use of the these reporting standards. It is seen that the usefulness and the
clarity of the data is identified with the help of these standards and this leads to the development
of better relationship among the stakeholder and the management. International Financial
Reporting therefore has a positive and strong impact on the construction of the financial
statements. Therefore, it can be said that the result is able to address the first objective of the
paper.
The next objective has been to assess the challenges that are observed within the financial
statements in relation to international financial reporting. It is seen that the results have been
successful in explaining this objective as well due to the fact that all the challenges in relation to
the construction of the financial statements have been addressed and the limitations that have
been existent with the accounting standards. All these elements have been addressed and hence a
proper idea over the accounting standards that are helpful for the purpose of reporting and the
challenges that are seen within the financial statements have been understood. Therefore, both

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the objectives have been explained and hence the result attained is true and valid. The conclusion
therefore comes to the fact that international financial reporting with the help of the accounting
standards have significant amount of impact over the preparation of the financial statements of
the companies that are operational in the economy.
5.3 Recommendation
The recommendation provided in this paper is attained with the help of the gathered
outcome of this paper. It is recommended that the accounting standards need to be amended with
relation to the changes that are taking place in the economy and the new and improved strategies
and policies that are incorporated by the national and international accounting bodies. It is even
recommended that the feedback from the companies who are preparing their financial statements
with the help of these standards needs to be taken into consideration so that their advices and
recommendations can be considered in order to improve the standards and thereby enhance the
level of the financial statements for the companies. The incorporation of recommended strategies
would be helpful in the betterment of the overall reporting framework for the companies.
5.4 Future Study
Future study on this topic is possible because of the fact that the accounting standards
would be changing with the changes that are taking place with the help of several policies and
regulations that are newly incorporated. Hence, it can be said that the future research can be
undertaken as new and improved results in the future course of time can be attained and hence
comparison of the same with the current research would be able to generate the changes that
have taken place in the future research work.

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