Financial Reporting Quality: Contemporary Issues Analysis

This report delves into contemporary issues in accounting, specifically examining financial reporting quality within the context of International Financial Reporting Standards (IFRS). The report explores the factors driving the global convergence of IFRS from an institutional theory perspective, analyzing how isomorphism and legitimacy influence accounting practices. It discusses the impact of IFRS on financial reporting quality, considering various research articles and the challenges associated with implementation in different countries. The analysis covers the role of accounting standards, institutional contexts, and the interplay between legitimacy theory and IFRS. The report highlights the importance of aligning business decisions with accounting standards and the need for financial reporting to adapt to changes in business activities. This report provides a comprehensive overview of the current landscape of accounting and financial reporting, offering valuable insights into the evolution of accounting standards and their implications for businesses and financial users.

Running head: Contemporary Issues in Accounting
Contemporary Issue in Accounting
Name of the Student
Name of the University
Author Note

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Contemporary Issue of Accounting
Table of Contents
International Financial Reporting Standards..............................................................................2
Accounting in Institutional Context...........................................................................................2
Isomorphism and Legitimacy:....................................................................................................3
Reference....................................................................................................................................5

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Contemporary Issue of Accounting
International Financial Reporting Standards
The international accounting reporting standards helps company to show all the
required details in the financial reporting which the company should do in regards of the
financial user. It can be seen that there is big rise of the international Financial Reporting
Standard as per the coming review of the public (Christensen et al., 2015). As per the recent
times it can be said that success in the same is been happen due to innovation and
development of the standard (DeFond et al., 2014). As it is been accepted by all the company
so it can be said that the standard is able to provide an high quality norms and regulation so
that it is been acceptable by all the company.
Institutional Context in Accounting
The process and the guidelines which help the company to the financial statement properly
are been guided in the accounting standard. Accounting standard can vary from country to
country as due to the legal, political and economy of the country (Cascino and Gassen 2015).
As the accounting standard have to be as per the industry norms also the government norms
so that company is able to fulfil the business requirement of the country. As there is so much
increase in the regulation and development of the International Financial Accounting
standard so this lead to increase this barrio upon the local limit of the standard so it can be a
big problem if the company is unable to meet the standard requirement and the government
norms. It can be said that most of the country are following IFRS for doing the accounting of
the company as because of the insufficient of their own accounting standards (Ramanna and
Sletten 2014). It can be said that it not able to have proper standard so they are following the
international accounting standard. As per the research it can be said the countries who have
good and sufficient accounting standard so that also are able to follow the international
accounting standard reporting. So it can be the norm which is there in the international

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Contemporary Issue of Accounting
reporting standard is a very high quality and can be followed easily by all the company in
different country. National accounting is been done by the county of that country but as it is
not able to provide all the related amount of guidance so company are shifting to international
accounting standard(Carraher 2014). As the national accounting standard is not able to satisfy
all the required details of the theory so to overcome the same the company are shifting their
policy as per the international accounting standard so that they can able to provide a better
amount of the details in the financial statement.
Isomorphism and Legitimacy:
Isomorphism and legitimacy theory explains the concept of organisational rational decision
making theory. Every business organisation need to take certain business decisions from time
to time to be compete in the market and to be ahead in the market. As per the business
requirement the company have to take necessary decision and to take that it have to make
different strategies so that it can able to make proper amount of the decision in the company.
The legitimacy theory help the company to know all the policy and the theory which are
required by the company in order to achieve the desired amount of business goals and also
help them to get an smooth flow in the business. The combination of the International
reporting accounting standard and the legitimacy theory is required as the company which
make decision with the help of the theory and take the decision is directly affect the financial
statement of the company and also it affect the reporting of the same so it is necessary for the
company to go hand in hand in regards of the same. So as it directly the affect the reporting
of the company so the changes and the development in the accounting standard can directly
affect the same of the company financial statement.
All the business decision must be in line with the respective accounting standards and
disclosure requirements of the company (De George et al., 2016). And all those decisions
must be taken in accordance and without violating the principles of those accounting

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standards. Therefore, the legitimacy theory or the legitimacy approach must fulfil all the
details in the reporting as per requirements of the company and, the accounting and reporting
standards changes and adopts certain changes in it for accommodating or facilitating those
legitimacy theories of the companies.
The legitimacy also requires the business accounting and reporting to be done with a
social perspective also, that means the social perspective of the business accounting and
reporting must also be complied with (André, Filip and Paugam 2015). It is necessary to
know the financial user about the all the information of the company whether it is financial or
non- financial so to provide those information company should disclose all the matter in their
financial reporting so that it help the user so get all the required amount of information and
able to take necessary decision in regards of the company.
Revolution in the business activity can be termed as one of the activity which affect
directly affect the development and the innovation in regards of the accounting and reporting
standard. As per the business activities the company do the valuation and the reporting so if
there is some amount of the changes in the financial statement of the company due tom
change in the business activities that the company also have to change the usage of
accounting standard also should amend the financial reporting which is been given in the
financial statement of the company (Doukakis 2014). As per the change which are coming
the business practices of the company so to adopt the same it is been required by the
accounting standard to come up with some changes so it can able to match the changes in the
business activities and able to help the user to get proper information of the business of the
company. The changes is to be made so the quality of the reporting standard is been increased
and also the user are able to get proper amount of the information.

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Reference
André, P., Filip, A. and Paugam, L., 2015. The effect of mandatory IFRS adoption on
conditional conservatism in Europe. Journal of Business Finance & Accounting, 42(3-4),
pp.482-514.
Carraher, S.M., 2014. Consumer behavior, online communities, collaboration, IFRS, and
Tung. Journal of Technology Management in China, 9(1).
Cascino, S. and Gassen, J., 2015. What drives the comparability effect of mandatory IFRS
adoption?. Review of Accounting Studies, 20(1), pp.242-282.
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.
De George, E.T., Li, X. and Shivakumar, L., 2016. A review of the IFRS adoption
literature. Review of Accounting Studies, 21(3), pp.898-1004.
DeFond, M.L., Hung, M., Li, S. and Li, Y., 2014. Does mandatory IFRS adoption affect
crash risk?. The Accounting Review, 90(1), pp.265-299.
Doukakis, L.C., 2014. The effect of mandatory IFRS adoption on real and accrual-based
earnings management activities. Journal of Accounting and Public Policy (JAPP), 33(6),
pp.551-572.
Ramanna, K. and Sletten, E., 2014. Network effects in countries' adoption of IFRS. The
Accounting Review, 89(4), pp.1517-1543.