International Financial Reporting Standards: Implementation Issues

This essay explores the challenges in implementing International Financial Reporting Standards (IFRS) in the post-harmonization era, focusing on the complexities of harmonizing global standards with local accounting norms. It examines implementation-related complications in both emerging and developed economies, highlighting the role of local accounting actors and institutional frameworks. The essay references research on harmonization levels in South Asian countries, concerns in countries like China regarding transparency and fair value accounting, and the influence of political, economic, and social factors on IFRS adoption. It also addresses challenges such as professional training, taxation liabilities, and information asymmetry, concluding that a time-bound translation and application of a theoretical framework for emerging economies is difficult to achieve.

Issues in Implementing International Financial Reporting Standards (IFRS) in the
post IFRS harmonisation era
As Business transcended boundaries with the advent of globalisation, it’s
language i.e. Accounting gradually developed from a record keeping practice to a
science of intelligent analytical reporting in the form of Financial Reporting.
Perhaps, the most significant step in the direction of standardising and
converting this reporting practice into a globally acceptable technique was the
introduction of International Financial Reporting Standards (IFRS) by the IFRS
Foundation and the International Accounting Standards Board (IASB). However,
the deployment of these standards in the diverse commercial landscapes across
the globe poses the biggest challenge of harmonisation, so that, the financial
statements are globally comparable without any friction between these global
standards and the local accounting norms. In this context, it is worthwhile to take
a closer look at the implementation related complications in emerging as well as
developed economies to understand the utility of these standards in the correct
perspective.
Obviously, an interesting proposition is to understand these complications along
with investigating the interplay between local accounting actors and the
institutional framework as suggested by Cătălin Nicolae Albu, Nadia
Albu and David AlexanderCătălin Nicolae Albu, Nadia Albu and David Alexander in
their research titled ‘When global accounting standards meet the local context—
Insights from an emerging economy’ in which the analysis was conducted in the
context of Romania. They developed their research to analyse the responses of
accounting actors to harmonise their practices under institutional pressure of
conformity. It is worthy to be noted that the role of local actors is of much
significance in this context as they play a calibrated role in the generation of
organizational action for implementation targeting both legitimacy and fulfilment
of vested interests. The degree of harmonization in south Asian countries varies
sector-wise as measured using Van der Tas's (1988) I index and Archer, Delvaille,
and McLeay's (1995) modified C index in the research conducted by Muhammad
Jahangir Ali, Kamran Ahmed, Darren Henry. Their work revealed a higher level of
harmonisation in certain opaque areas such as research & development costs,
business combinations etc. while it is lower in common areas such as taxes on
income, borrowing costs etc. due to the modelling and data requirements of
these tenets. (Emerald Publishing Limited, 2019) The grave concerns
regarding the limitations of IFRS harmonisation are even reflected in countries
like China where the greater transparency requirements of these tenets may lead
to consequences like de-listing for loss reporting firms. The most serious issue in
the contention is adoption of Fair Value Accounting (FVA) and its impact on
accounting’s contracting role. (John Wiley & Sons, Inc., 2019)
In addition to above issues, one needs to consider the political, economic and
social perspective behind adoption of IFRS. As stated in the Institutional
Isomorphism Theory, decision to adopt IFRS among developing countries is more
diven by social pressures of legitimacy rather than economic benefits. Also, other
factor that influence the adoption include culture, scale understandibility,
education, transalation issue, incentives. These are critical factors which
influence adoption from institutional perspective.
Amidst these challenges, obviously the notable ones being training of
professionals and redressal of taxation liabilities on account of convergence to
IFRS (like the case of UAE), the transition from GAAP is not only cumbersome, in
fact, it involves a lot of sophisticated precision and legal support. For instance, in

the case of Europe the adoption of fair value accounting led to an asymmetry of
information between a firm and its environment making their privileged data
vulnerable along with disturbing the complementarity and specificity of their
assets. (Vincent Bignon, 2019) In view of the above, it would be prudent to
conclude that the time bound translation and application of an institutional
theoretical framework for emerging economies is not only farfetched but even its
superficial channelization is easier said than done.
References
Emerald Publishing Limited, 2019. Has the harmonisation of accounting practices improved? Evidence from
South Asia. [Online]
Available at: https://www.emeraldinsight.com/doi/pdfplus/10.1108/IJAIM-12-2014-0082
[Accessed 11 May 2019].
John Wiley & Sons, Inc., 2019. Challenges for Implementation of Fair Value Accounting in Emerging Markets:
Evidence from China*. [Online]
Available at: https://onlinelibrary.wiley.com/doi/full/10.1111/j.1911-3846.2011.01113.x
[Accessed 11 May 2019].
Vincent Bignon, Y. B., 2019. An Economic Analysis of Fair Value: Accounting as a Vector of Crisis. [Online]
Available at:
https://www.researchgate.net/publication/228303300_An_Economic_Analysis_of_Fair_Value_Accounting_as
_a_Vector_of_Crisis
[Accessed 11 May 2019].