Compliance with IFRS mandatory disclosure requirements: A structured literature review

Joint venture investments: An analysis of the level of compliance with the disclosure requirements of IFRS 12

“…According to the "boiler-plate" perspective, preparers, auditors, and regulators use IFRS Standards disclosure requirements as a checklist instead of applying judgment to determine information relevant to users. Tsalavoutas et al (2020) provide evidence that the problem is more pervasive and is also associated with low compliance levels (and high standard deviation of non-compliance levels). It appears that many preparers selectively provide users with trivial and uncostly disclosures, but are not complying with the IFRS Standards requirements for disclosure where proprietary information is required (Tsalavoutas et al, 2020).…”

“…The literature review of Hellman et al (2018), for example, indicates a significant level of non-compliance with general and specific disclosure requirements of IFRS Standards and high volatility across firms. Noncompliance is also reported in the literature review of Tsalavoutas et al (2020), especially in regard to specific accounting standards such as IAS 17, 21, 28, 31, 37, 39, and 41 and IFRS 6 and 8. Tsalavoutas et al (2020) also highlight that the studies reviewed draw mostly on samples from a single country and that there is an absence of specific evidence (i.e., in-depth "single topic" studies) on compliance with key areas such as investments in associates and joint ventures (IAS 28,IAS 31,now IFRS 11).…”

“…The enforcement mechanisms are also identified as a key issue for achieving compliance with IFRS Standards. Tsalavoutas et al (2020) literature review indicates that a majority of companies studied do not comply with all mandated disclosure requirements; however, the studies surveyed mostly draw samples from a single country and focus on small markets or less developed economies. The few crosscountry studies usually analyze only firms with the highest market capitalization.…”

“…While leverage and profitability tend to be associated with compliance levels, the direction of the relationship differs between studies. Tsalavoutas et al (2020) highlight a lack of evidence for smaller firms from developed markets and an absence of detailed evidence on compliance with disclosures in areas such as leasing (IFRS 16), post-retirement benefits (IAS 19), sharebased payments (IFRS 2), provisions and contingent liabilities (IAS 37), and interests in associates and joint ventures (IFRS 11). Our research aims to address the gap associated with IFRS 11.…”

“…IFRS 12 requires firms with interests in joint ventures to disclose information about (a) "the nature, extent and financial effects of its interests in joint arrangements" and (b) "the nature of, and changes in, the risk associated with its interests in joint ventures" (IASB, 2011c, paragraph 20). Tsalavoutas et al (2020) argue that an inherent limitation of research on disclosure is the author's subjective judgment used to determine whether a disclosure requirement is not applicable (or immaterial/irrelevant) to the firm or whether the firm is not complying with the requirement. We believe this limitation is more pronounced for disclosure requirements related to the "nature of, and changes in, the risk associated with its interests in joint ventures," given we are not able to properly evaluate whether the firm has commitments or contingent liabilities relating to its interests in joint ventures (IASB, 2011c, paragraph 23) or whether the firm is not complying with this disclosure requirement.…”