BBA RESM202: Benefits and Challenges of IFRS Adoption in UAE

This report delves into the benefits and challenges associated with the adoption of International Financial Reporting Standards (IFRS) in the United Arab Emirates (UAE). It begins with an introduction highlighting the global trend towards IFRS harmonization and its importance in enhancing the quality and transparency of financial reporting. The research problem focuses on the potential advantages and disadvantages of IFRS adoption for the UAE's economic growth, considering the diversity in environmental and cultural aspects. The report presents a hypothesis addressing whether the benefits outweigh the challenges. The research plan outlines the use of secondary data sources, including journal articles, books, and internet sources, to analyze the experiences of other emerging economies. The conclusion emphasizes that while IFRS adoption can improve financial reporting quality and disclosure levels, its effectiveness is influenced by factors such as the strength of enforcement bodies, user education, and the presence of strong lobbying from regulators and preparers. Despite these challenges, the report concludes that the benefits of IFRS adoption in the UAE outweigh the associated costs, leading to improved decision-making and a reduction in accounting fraud and manipulation. The report also references the use of fair value measurements and the importance of a strong regulatory framework and skilled professionals.

Running Head: THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
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1THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
Table of Contents
Introduction................................................................................................................................2
Research Problem.......................................................................................................................3
Hypothesis..................................................................................................................................3
Research Plan.............................................................................................................................3
Conclusion..................................................................................................................................4
Reference....................................................................................................................................6

2THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
Introduction
It is due to globalization process, the interest shown towards harmonization of process
of the financial reporting through introduction of unitary set of the IFRS at the globalized
level, have been enlarged. Now, IFRS has become prevalent set of the standards of financial
reporting that is used globally (Trabelsi & Trabelsi, 2014). It is widely followed and most
accepted standards of accounting all over world. It plays key role in raising quality of
accounting due to its strict transparency requirements (Abedana & Gayomey, 2016). The
speeding of convergence or the harmonization process of local regulation with IFRS was
made by the aspects, for instance disclosing of accounting information according to local
standards not fulfills always the needs of information of the market leaders, which existing
differences in between the local system of accounting represents key detriments in process of
understanding of foreign investors of disclosed information of the accounting in other
countries’ financial statements (Alemi & Pasricha, 2016).
The rapid changes in financial reporting in world of the financial reporting is
demanding enforcement of the IFRS with purpose of promoting more credibility,
consistency, accounting information relevancy and the globalization of economies. Moreover,
system of financial reporting of the business operations has experienced immense
transformation over the last couple of the decades (Zakari, 2014). Accounting standards’
convergence begun in early 2001 with objective in bringing harmonization and transparency
of standards. The differences in the compliance are engrained in various market
environmental aspects as well as structures of the corporate governance, under which there is
implementation of IFRS (Edeigba, 2017).
IFRS enforcement contributes towards global flow of investment in the developing
and developed economies as well as it will enhance investors’ ability for comparing options
of investment on globalized basis, consequently falling risk of the judgement errors. There
are indications by the researchers regarding requirement of examining challenges
encountered in the actual implementations of IFRS in the developing economies (Perera &
Chand, 2015). Hence, this research paper aims for discussing the benefits and the challenges
of adoption of the IFRS in UAE. For this assessment will be done on the benefits gained and
challenged experienced by the entities in UAE, following IFRS introduction. Since, European
Union announced for adopting the IFRS by the listed entities, various countries following the

3THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
ensemble in the hope to gain competitive edge to attract FDI for boosting their growth of
economy (Hassan, Rankin & Lu, 2014).
Research Problem
Many emerging economies have started adopting IFRS issued by the IASB. The
initiative to adopt IFRS of developing countries was the reaction and reflection of
announcement by EU in 2002 for adopting IFRS in the listed entities of Europe by year 2005.
Further, some researchers’ states benefit of IFRS adoption in the developing countries, for
instance, FDI. However, other researchers are more concerned about debate of adoption
because of diversity in environmental and cultural aspects among the countries that would be
disadvantageous to advantage of adoption. UAE is the developing country for which the
IFRS adoption can be either detrimental or advantageous to the economic growth.
Many researches have been done on benefit and determinants of IFRS adoption,
however, all those research does not able to provide clear picture of real situation of IFTRS
adoption. There is lack of information and clarity on effects of the IFRS adoption in emerging
countries and economies. This research study aims to address gap between practice and
literature related to benefit and challenges of the IFRS adoption in UAE. There is gap in
literature regarding IFRS adoption within emerging economies. Hence, this paper aims to fill
that gap (Nurunnabi, 2018).
Hypothesis
The hypothesis study is put according to the research problem of research study. For
solving research problem, null hypothesis and alternative hypothesis have been established,
which are as follows:
 H0- There is no benefit rather great challenges in IFRS adoption in UAE.
 H1- There is benefit and less challenges in the IFRS adoption in UAE.
Research Plan
Plan of research is the brief documents that sets out initial thoughts on the project of
research in the concise manner. It includes choosing important subject that is specific then
discussing background of topic, discussing problem area in research, building the hypothesis,
collecting data, analyzing finding and concluding the paper. This research has used secondary
sources of data sources. Further, the method used for collecting the data are descriptive and
explanatory. Moreover, in this paper various journal articles that mainly focused on obstacles

4THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
and benefit met in process of IFRS regulations adoption or convergence or harmonization
with the international standards within emerging economies have been reviewed and
analyzed (Herath & Alsulmi, 2017). The review of these papers is done for highlighting some
of the results generated from these countries experience. Apart from this, this paper has
reviewed book, internet sources and other the relevant and useful sources. The attempt has
been made for not harming the involved participants of research. The great priority towards
respect for research participants’ dignity has been given. Before the research study, the
consent has been taken from the involved participants. The protection towards disclosures
and privacy of research participants has been ensured (Mohammadrezaei, Mohd-Saleh &
Banimahd, 2015).
Conclusion
This paper concludes that integration of financial market will benefit the investors in
comparing easily between the various countries’ market. It has been analyzed that although
US GAAP provides disclosures, however, IFRS helps in providing more disclosures in
general compared to US GAAP and it covers all the cases in detail. It has been observed that
disclosure level in UAE gets affected by the political influence. The accounting preparers
makes an effort to guard their self-interests through reducing cost. It might be true in case of
weak regulatory. This results in the fact that users may not be able to find information, which
they require that could be reflected in their ability for making decisions.
It has been found that financial reporting that is based on IFRS leads towards useful
decision-making. Its adoption helps in improving the financial reporting quality and the
disclosures level. However, usefulness of decision is influenced by the enforcement body’s
weakness. It is influenced by the strong lobbying of the regulators as well as the preparers of
the accounting. Further, this is affected by levels of users’ education as well as lack of their
information relating to IFRS. Moreover, higher statutory control and high-power distance and
confidentiality may dominate certain practices of accounting at the present, along with fact
that weakness in the education of accounting leads towards exacerbating the problem related
to IFRS adoption. This suggests that the users of accounting may find it difficult for making
decisions, as their ability for making decisions may get affected by the professional
judgements. The other problem that may get arise is from fair value uses. Although, there are
great benefit of fair value over the historical cost, but uses of the fair value measurement is
currently facing the concern of lack of active market, weak regulatory body and lack of the
suitably qualified individuals.

5THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
However, despite of all the above challenges and concerns related with IFRS
adoption, its benefit outweighs the challenges. Its benefit is more than its costs. IFRS is
principle-based, in which judgement of management plays major role. Hence, it is expected
that IFRS adoption leads towards reduction in fraud and manipulation of accounting.

6THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
Reference
Abedana, V., & Gayomey, J. (2016). IFRS/IAS Adoption and its Tax Challenges and
Management–Views from Ghana. The International Journal Of Business &
Management, 4(5).
Alemi, T. D., & Pasricha, J. (2016). IFRS Adoption progress in Ethiopia. Research Journal of
Finance and Accounting, 7(1), 69-81.
Edeigba, J. (2017). An Investigation of the challenges in International Financial Reporting
Standards’ adoption: evidence from Nigerian publicly accountable
companies (Doctoral dissertation, Lincoln University).
Hassan, E. A., Rankin, M., & Lu, W. (2014). The development of accounting regulation in
Iraq and the IFRS adoption decision: an institutional perspective. The International
Journal of Accounting, 49(3), 371-390.
Herath, S. K., & Alsulmi, F. H. (2017). International financial reporting standards (IFRS):
The benefits, obstacles, and opportunities for implementation in Saudi
Arabia. International Journal of Social Science and Business, 2(1), 1-18.
Mohammadrezaei, F., Mohd-Saleh, N., & Banimahd, B. (2015). The effects of mandatory
IFRS adoption: A review of evidence based on accounting standard setting
criteria. International Journal of Disclosure and Governance, 12(1), 29-77.
Nurunnabi, M. (2018). Perceived costs and benefits of IFRS adoption in Saudi Arabia: An
exploratory study. Research in Accounting Regulation, 30(2), 166-175.
Perera, D., & Chand, P. (2015). Issues in the adoption of international financial reporting
standards (IFRS) for small and medium-sized enterprises (SMES). Advances in
accounting, 31(1), 165-178.
Trabelsi, N. S., & Trabelsi, M. (2014). The value relevance of IFRS in the UAE banking
industry: Empirical evidence from Dubai financial market, 2008-2013. International
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7THE BENEFITS AND CHALLENGES OF IFRS ADOPTION IN UAE
Zakari, M. (2014). Challenges of international financial reporting standards (IFRS) adoption
in Libya. International Journal of Accounting and Financial Reporting, ISSN, 2162-
3082.