BAO5535 - Analyzing Financial Reporting Quality with IFRS Impact

This report examines the ongoing debate regarding the harmonization of international accounting practices through International Financial Reporting Standards (IFRS). It analyzes research articles from various emerging and developed economies, including Romania, South Asian countries, China, Malaysia, UK and United Arab Emirates, to assess the impact of IFRS implementation on financial reporting quality. The report highlights the challenges and benefits of adopting IFRS, including issues related to local context, compliance, earnings quality, and fair value accounting. It concludes that while IFRS represents a significant reform in accounting, achieving global harmonization remains a complex endeavor with both advantages and disadvantages, emphasizing the need for continued research and adaptation.

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Table of Contents
Introduction.................................................................................................................... 3
Analysis........................................................................................................................ 3
Conclusion..................................................................................................................... 5
References................................................................................................................. 5
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Introduction
The following article deals with the idea whether the various international reporting standards
and frameworks that have been developed has resulted in harmonizing the various accounting
practices across the globe or has resulted in increased conflicts due to clash of interest areas.
There are various arguments that have been stated for and against this and same has been
analyzed through various research articles that has conducted studies in different parts of the
world to study how the reporting framework is affecting the accounting standards that are there
and how and if at all it is beneficial for the future (Abdullah & Said, 2017).
Analysis
In case of Romania we see that there are many issues and conflicts that companies faces when
they try to match the global standards with the local context and that has affected how
accounting is done in such countries (Albu, et al., 2014). There is lot of institutional pressure for
conformity with international standards. In case of south Asian countries like India, Bangladesh
and Pakistan, there is low conformity with harmonization as the high degree of flexibility which
is available in selecting benchmark with regards to international standards and due to non-
compliance by companies with IAS mandated requirements (Ali, et al., 2006). So, we lot of work
is required if balance is needed to be achieved. The audit quality researchers and financial
reporting standards can be work together and help in setting a framework that would be
beneficial for all the countries. It also leads to combining quality with research and
standardization, so that can play an important role for the international standard harmonization
(Gaynor, et al., 2016). In case of China, it is one of the largest global market for many industries
and that has led to setting up operations there and that led to research being conducted on how
multinational companies are operating there in terms of accounting and preparation of financial
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statements (He, et al., 2012). It also checks how fair value accounting has affected the financial
framework in China. It has been stated that mandatory compliance of IFRS has affected the
companies in negative way as it has increased complexities in many ways for these companies.
Further research has been conducted in Malaysian countries to see how IFRS adoption has made
a difference in earning quality of Malaysian Companies (Irvine, 2013). It shows that IFRS
adoption is related to reporting of higher earnings by the companies of the world. It also shows
that IFRS is associated with lower earnings management and higher value relevant. In case of
countries like UK, the affect is more apparent given the level of revenue involved in those global
organizations (Ismail, et al., 2013). There are lot of issues are involved with adoption of IFRS in
prior periods and that has changed with the updates that have been made on regular intervals. It
also shows that in countries like UK, the large use of fair value in case of IFRS has affected the
accounting methods followed by these organizations. In countries like United Arab Emirates that
was one of the hundred companies that adopted IFRS for global adoption, is also being affected
by the challenges of harmonization on a global basis. The country is facing issues with respect to
the matching the actual results from IFRS framework to the picture that was shown to these
people. So, we see that on a global level many countries are having their fair share of issues to
deal with such differences when it comes to matching the local with the global. But given the
issues involved, the companies are trying their best to adopt such practices as long-term benefits
from the same seems to be huge for the companies (Nobis ,2015). It can also be said that the
forming bodies of such regulations are trying to conduct more and more research and solve this
global issue of conformity (Charles H, Giovanna, Dennis M, & Robin W, 2015). Awareness
is being spread on how companies can get the best benefits by the adoption of the IFRS and
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change these issues and overcome the difficulties that are being faced by the companies (Borit &
Olsen, 2012).
Conclusion
Based on the overall research it can be said that IFRS is one of the greatest reforms in the field of
accounting and there are both pros and cons of the same, but the biggest achievement would be
to get all the companies of the world to harmonize so that infirmity can be achieved and there are
lot of benefits that are attached with it.
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References
Albu, C. t. l. N., N. Albu, and D. Alexander. 2014. When global accounting standards meet the
local context? Insights from an emerging economy. Critical Perspectives on Accounting
25 (6):489-510.
Ali, M. J., K. Ahmed, and D. Henry. 2006. Harmonization of Accounting Measurement Practices
in South Asia. Advances in International Accounting 19:25-58.
Borit, M. & Olsen, P., 2012. Evaluation framework for regulatory requirements related to data
recording and traceability designed to prevent illegal, unreported and unregulated
fishing. Marine Policy, 36(1), pp. 96-102.
Charles H, C., Giovanna, M., Dennis M, P. & Robin W, R., 2015. CSR disclosure: the more
things change…?. Accounting, Auditing & Accountability Journal, 28(1), pp. 14-35.
Gaynor, L. M., Kelton, A. S., Mercer, M., & Yohn, T. L. (2016). Understanding the Relation
between Financial Reporting Quality and Audit Quality. AUDITING: A Journal of
Practice & Theory, 35(4), 1-22. doi: 10.2308/ajpt-51453
He, X., T. J. Wong, and D. Young. 2012. Challenges for Implementation of Fair Value
Accounting in Emerging Markets: Evidence from China. Contemporary Accounting
Research 29 (2):538-562.
Irvine, H. 2008. The global institutionalization of financial reporting: The case of the United Arab
Emirates. Accounting Forum 32 (2):125-142.
Ismail, W. A. W., Kamarudin, K. A., Zijl, T. v., & Dunstan, K. (2013). Earnings quality and the
adoption of IFRS‐based accounting standards: Evidence from an emerging market. Asian
Review of Accounting, 21(1), 53-73. doi: doi:10.1108/13217341311316940
Nobes, C. 2015. IFRS Ten Years on: Has the IASB Imposed Extensive Use of Fair Value? Has
the EU Learnt to Love IFRS? And Does the Use of Fair Value make IFRS Illegal in the
EU? Accounting in Europe, 12 (2):153.
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