Analysis: Impact of IFRS Implementation on Accounting Quality

This report provides a comprehensive analysis of the impact of International Financial Reporting Standards (IFRS) implementation on accounting quality across different economies, drawing upon four key articles. The report examines the significance of IFRS, research questions, underpinning theoretical frameworks, key motivating literature, chosen research methods, sample selection processes, validity of questions, derived results, and conclusions. It investigates the varying effects of IFRS adoption on accounting practices in China, Australia, South Africa, and Greece, considering factors like earnings management, accounting quality metrics, and the influence of GAAP. The findings highlight the diverse consequences of IFRS implementation, including improvements in accounting quality, changes in earnings management, and the impact on financial reporting systems. The report concludes with recommendations based on the analysis, emphasizing the need for careful consideration of local economic contexts and enforcement mechanisms when implementing IFRS.

IMPACT OF IFRS
IMPLEMENTATION IN
DIFFERENT
ECONOMIES

INTRODUCTION
IFRS i.e. International Financial Reporting Standards are required to be applied
mandatorily in all the firms operating all over the world and financial reporting has to be
done in accordance with those standards. The four articles that have been taken in the
report are:
 Liu, C., Yao, L.J., Hu, N. and Liu, L., 2011. The impact of IFRS on accounting quality in a
regulated market: An empirical study of China. Journal of Accounting, Auditing &
Finance. 26(4). pp.659-676.
 Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS adoption
on accounting quality: Evidence from Australia. Journal of International accounting
research. 11(1). pp.119-146.
 Ames, D., 2013. IFRS adoption and accounting quality: The case of South
Africa. Journal of Applied Economics and Business Research. 3(3). pp.154-165.
 Dimitropoulos, P.E., Asteriou, D., Kousenidis, D. and Leventis, S., 2013. The impact of
IFRS on accounting quality: Evidence from Greece. Advances in Accounting. 29(1).
pp.108-123.

Q1. Why is this article important?
 The authors of the first article that has been taken i.e., Liu, Yao, Hu and Liu
(2011), identified in their research paper that the International Financial
Reporting Standards that have been developed and are prevalent in different
English speaking countries have a diverse effect on the countries with
different economic and social background.
 The second article presented by Chua, Cheong and Gould (2012), is in
accordance with the study that was earlier conducted by above Liu, Yao, Hu
and Liu (2011), and the researchers analyse the impact of implementation of
IFRS standards in Australia and the impact on the quality of accounting has
been evaluated
 The third article that has been taken in this literature review presented by the
authors in the year 2013, Ames (2013), identifies that whether the
improvement that was guaranteed in the accounting and its returns after the
implementation of IFRS
 The last article that has been taken is presented by authors, Dimitropoulos,
Asteriou, Kousenidis and Leventis (2013), conducts a wider analysis and uses
101 companies listed on the Athens Stock Exchange i.e. exchange of Greek.

Q2. What are the research problem/ question?
 The first article addresses the major research problem that whether the
applicability of IFRS standard is really relevant to all market types and specifically
they have addressed this question for the market of China.
 In the second article, Chua, Cheong and Gould (2012), have identified and
analysed three key aspects in the implementation of IFRS and has evaluated
whether these hold true in the context of Australian companies or not.
 The third article analyses presented by Ames (2013), again revolves around the
same concept i.e. to analyse whether the three key aspects of implementation of
IFRS policies holds true or not amongst the south African companies
 In the last article, the Dimitropoulos, Asteriou, Kousenidis and Leventis (2013),
examine the implementation of IFRS amongst the Greek Companies and the
research problem that is addressed by the authors involves analysis that whether
there is enough evidence regarding the accomplishment of the stated objective
and benefits of IFRS implementation on the 101 selected Greek companies.

Q3. What are the underpinning theoretical frameworks?
 The first article that has been taken in this literature review underpins the major
theoretical concept that is, the Chinese companies are not being significantly
impacted and the perception that the application of IFRS on a compulsory basis
 In the second article where the research has been conducted on the
implementation of IFRS on the Australian companies, the authors have
formulated the theoretical framework that the accounting standards that the
country currently uses are far more efficient and better
 The third article involves formulation of a framework that implementation of IFRS
will help in strongly enhancing the comparability between the financial
performance of countries all over the world
 The last article which involves analysis of implementation of IFRS in the
companies that are operating in Greece, the major theoretical framework that
has be used by the researchers is that the removal of GAAP by IASB and in its
place implementation of IFRS

Q4. What are key motivating literatures on which study
depends?
 In the first article there are a variety of research papers published by Chinese and other
financial experts that the researchers have taken into consideration. Chua & Taylor (2008)
helped the authors in identifying that the rise of IFRS and its implementation is inexorable and
the uniform applicability and relevance was critiqued.
 In the second article that was published research by Barth et al. (2008), was used to interpret
that implementation of IFRS symbolised high quality of accounting practices and its adoption in
the companies where Ashbaugh and Pincus (2001), concluded that IFRS increases the accuracy
 The researchers analysed the findings of Elbannan (2010), stating that in Egyptian companies,
the earning management does not increase after the IFRS were adopted and author enforced
lack of proper knowledge as a reason for decline. Additionally, Morais and Curto (2008), stated
that out of the 30 firms listed in Portugal, after IFRS was adopted, there earnings were not
smooth and the barriers increased.
 In the last article, reference was taken from, Tsalavoutas and Evans (2010), the Greek
accounting regulations are mainly based heavily in the regulations of the state and the cost of
monitoring is associated with it. Tsakumis (2007), further stated that the accounting
professionals of Greek are mainly associated with the easy acceptance of inequality and
preference for material success rather than on themselves.

Q5. Which research methods have been chosen?
 In the first article, the research methods that have been used are evaluation
of controls that are associated with the voluntary decisions that a firm makes
and the different accounting decisions that a firm is required to make.
 In the second article that has been selected, accounting quality metrics has
been selected as an appropriate method to draw relevant conclusions and
the three different perspectives of the IFRS implementation were analysed
and interpreted which were earning management, timely loss recognition and
value relevance.
 The two hypothesis that were formulated in the third article have been tested
on the basis of different statistical tools used to draw relevant conclusions.
 The last article has been analysed by selecting an appropriate sample and
then using different tools top test different hypothesis.

Q6. How sample has been selected?
 In order to select an appropriate sample in the first article all the Chinese
companies that were listed on the Compustat form the period of 2005 to 2008 were
selected and only those firms that were listed with A-shares were taken from a
single stock market.
 The second article involved selection of firms initially that were listed on the
Australian stock exchange based on the market capitalisation.
 The third article involves collection of variables that have been selected form the
entire universe of the Global firms and are listed in the South Africa and selection of
these 3950 variables that are selected over the time period of 2000 to 2011 years
has been evaluated
 The fourth article involved selection of 101 companies that were all listed on the
Athens Stock Exchange and amongst these 101 companies that were selected, 76
of them complied with the mandatory implementation of IFRS policies and
standards and the remaining 25 companies were those who has signed up for
implementation of IFRS on a voluntary basis.

Q7. How validity of questions has been addressed?
 The first article met the validity criteria by ensuring that all the three major
variables that are associated with the implementation of IFRS were thoroughly
evaluated and a hypothesis was formulated for each factor
 Validity was addressed adequately in the second article in which the researchers
elaborately explained the manner in which the model was adapted for research and
by incorporating appropriate selection criteria
 In the third article, the sample size of the selected variable were selected was
bigger and this led to removal of many biasness that could have been incorporated
in the research through selection of a sample.
 Consecutively, the fourth article conforms to the validity criteria by implementation
of proper models and selection process. the simple criteria that were set up for
selection of companies that would assists in analysing the view point of both pre
and post IFRS implementation was helpful in assisting the researchers and this
selection minimises the chances of any biasness or partiality in the selection
process.

Q8. How the results were derived and what are the findings?
 The research conducted in the first article helped in concluding that the earnings
management of the companies in China declined after IFRS was mandatorily applied in
the year 2007 and this confirmed the substantial change in the earing variability.
 The result from second article helps in deducing that mean and median values in all the
continuous test variables were significantly different and therefore this can be used to
analyse the economic downturn.
 Third article shows the results that there was a significance difference in the earnings
that were adopted and the coefficient is negative which can potentially affect the
macroeconomic factors.
 Fourth article draws results in the form of statistical results and the regression analysis
of timely lo9ss recognition and IFRS was found to be positive

Q9. Conclusions and
recommendations
 Conclusion from the first article helped in identifying that after the
implementation of IFRS standards on the Chinese companies
 The second article concluded that the overall quality of the
accounting standards had improved and the transition from GAAP to
IFRS led to improvement in the overall financial reporting system
 The third article helps in concluding that the adoption of IFRS in South
Africa was a very unique step
 The fourth and last article assisted in concluding that implementation
of IFRS helps in concluding that the reliability of financial reporting
increases but, it was also highlighted that the lax enforcement can
lead to limiting the managerial discretion

SUMMARY
 The impact of IFRS adoption in the accounting systems of different
countries helped me identifying and analysing that how IFRS gets
impacted and impacts the accounting standards and reporting
formats.

CONCLUSION
 Collectively, all the articles helped in analysing that the different
research papers that are published in different countries related to
the implementation of IFRS in different economies impacts the
countries accounting policies differently.

References
 Liu, C., Yao, L.J., Hu, N. and Liu, L., 2011. The impact of IFRS on accounting
quality in a regulated market: An empirical study of China. Journal of Accounting,
Auditing & Finance, 26(4), pp.659-676.
 Chua, Y.L., Cheong, C.S. and Gould, G., 2012. The impact of mandatory IFRS
adoption on accounting quality: Evidence from Australia. Journal of International
accounting research, 11(1), pp.119-146.
 Ames, D., 2013. IFRS adoption and accounting quality: The case of South
Africa. Journal of Applied Economics and Business Research, 3(3), pp.154-165.
 Dimitropoulos, P.E., Asteriou, D., Kousenidis, D. and Leventis, S., 2013. The
impact of IFRS on accounting quality: Evidence from Greece. Advances in
Accounting, 29(1), pp.108-123.
 Chua, W. F., & Taylor, S. L. (2008). The rise and rise of IFRS: An examination of
IFRS diffusion. Journal of Accounting and Public Policy, 27, 462-473.
 Cormier, D., Demaria, S., Lapointe-Antunes, P., & Teller, R. (2009). First-time
adoption of IFRS, managerial incentives, and value-relevance: Some French
evidence. Journal of International Accounting Research, 8, 1-22