IRFS Adoption in Australia: Impact on Accounting Quality Analysis

This report examines the impact of International Financial Reporting Standards (IRFS) adoption on accounting quality in Australia, drawing from academic research. It highlights that voluntary IRFS adoption generally leads to positive impacts on financial reporting quality, while mandatory adoption can initially cause declines in accrual reliability due to involuntary implementation. The report notes that Australian firms experienced a decline in accrual reliability after mandatory IRFS adoption, but reliability improved over time. It also points out that the frequency of small losses decreased, and the consistency of profits improved post-adoption. Furthermore, the adoption of IRFS has made financial statements more complex but also easier to understand for stakeholders, ultimately improving the quality of accounting in Australia.

1
The impact of IRFS
adoption in Australia
The implication on accounting quality

2
Introduction
• Research paper from international accounting: the impact
of IRFS adoption in AUSTRALIA; Evidence from academic
research. The paper is found from the following link
http://www.aasb.gov.au/admin/file/content102/c3/AASB_R
R-12_10_16_IFRS_Lit_Review.pdf
.
• The presentation therefore focuses on the implications of
the IRFS adoption on the general quality of accounting.

3
Implication of IRFS on the quality of
accounting
• The relative voluntary adoption of the IRFS has had positive impacts on
the quality of the reports in the firms.
• Several researches have implied that if a firm voluntarily adopts the
standards the impact is rather positive.
• Same researches shoe that involuntary responses from firms that adopt
these changes due various impact issues do not receive the desired issues
that they would like to receive.
• These therefore implies that the firms overall proposal of implicating the
standards should be voluntary so that the firm receives the overall benefit.

4
Implications of the IRFS on the
general quality accounting
• The accrual reliability in Australian firms have shown
decline after the mandatory IRFS adoption.
• The de line is due to the involuntary implementation of the
standards. However after the adoption there is significant
improvement of reliability. There are rare attenuated
decrease in accrual reliability.
• This implies that firms should voluntarily adopt the IRFS
standards in order to realize its positive effects on the firms.

5
Implications of the IRFS on
accounting quality
• According to the paper, the firms should adopt the IRFS as
an implication.
• The frequencies of the small losses have become
unusually low since the adoption of the standards.
• Additionally the frequencies of profits by the companies
have also improved and become consistent.

6
Impact of IRFS accounting quality
on Australian firms(AASB)
• Most Australian firms have adopted the IRFS accounting
standards.
• This has had different impact on the public firms.
• Accrual reliability of the Australian firms have
significantly declined after the mandatory adoption of the
IRFS.

7
Impact of IRFS accounting quality
on Australian firms(AASB)
• The AASB deferred taxes have value relevance in most Australian
firms.
• These is in line with the IRFS standards, therefore most firms
adopted the revaluation balance sheet with very minimal
challenges.
• The taxes attributed to the non- revaluation balance sheet was
significantly not important at all.
• This however has led to the improvement in the quality of
accounting in Australia.

8
Summary and practical contribution
of accounting quality.
• The overall adoption has had impact on the current
Australian IRFS adoption.
• Especially on the accounting quality of most of the firms.
• The practical contributions on the quality of accounting
include;

9
Summary and practical contribution
of accounting quality.
Several reports have shown positive outcomes since the
implementation of the IRFS on accounting quality.
This is based on financial reports that have increased the
length and complexities of the firms financial statements.
It is therefore easy to read and understand financial
statements especially for stakeholders that need to make
economic decisions for the firms.