Does IFRS convergence really increase accounting qualities? Emerging market evidence

Abstract

Purpose This study aims to examine whether International Financial Reporting Standards (IFRS) convergence process adds value to the accounting quality dimensions, including accruals quality, earnings smoothing, timely loss recognition and earnings persistence. Design/methodology/approach It analyzes the hypothesis of accounting quality changes in post-IFRS convergence by using the univariate and multivariate statistics. Particularly, the authors rely on panel data analyses using industrial companies’ data from 2008 until 2014, comprising 3,861 firm-years observations, in Indonesia. Findings The results indicate that there is no conclusive evidence that all accounting quality dimensions including accruals quality, earnings smoothing, timely loss recognition and earnings persistence increased in post-IFRS convergence. Practical implications The findings of this study may help regulators and standard setters to consider future adoption of IFRS, mostly to figure out the best “formula” to increase the usefulness of accounting information in post-IFRS convergence. Originality/value Rather than doing piecemeal work, the current study focuses on IFRS convergence on a broader aspect of accounting quality dimensions. It also focuses on the convergence process of IFRS as an alternative of full adoption, which has been the focus of many research studies.

Accruals in the Prediction of Forthcoming Cash Flows in the Companies Listed at Pakistan Stock Exchange

“…Generally, financial statements manipulated through earnings management; therefore, reliability and relevance challenged often. Farshadfar and Monem (2019) worked on the relevance of accruals in financial statements that ignored in prior literature (Fuad et al, 2019;Lai et al, 2013).…”

“…The reliability of financial reporting is essential in the estimation of forthcoming cash flows as the investor's belief in the financial statement. Owners also assess the managers' performance through relevance and reliability of items reported in financial statements published, and that later used for investment (Efayena, 2015;Irwin, 2015;Blessing, 2016;Frank, 2018;Fuad, Juliarto and Harto, 2019). Financial information reported in financial statements sends signals to investors to interpret signals and make economic decisions (Morris, 1987), hence, the investor's belief that data postulated in financial statements is the significant information to invest in the company.…”

“…Accrual based accounting is considered a better predictor of future cash flows than cash based accounting (Dechow et al, 1998). Therefore, the financial statements should prepare on accruals-based accounting principles (Young, 1994;Hertzberg et al, 2010;Bloomfield et al, 2014;Ciconte et al, 2014;Dechow et al, 2014;Barth et al, 2015;Casey et al, 2017;Leal et al, 2017;Fuad et al, 2019). Accruals narrated in financial statements by various accountants are inconsistent and customarily recorded on the concept of earnings management.…”

Differences in the Values of Financial Indicators Depending on the Reporting System

“…In addition, it notes that, following the adoption of IFRS in China, there has been a disproportion in planned foreign investment due to the weak institutional security of IFRS [4]. The same research of other author in his result shows that there is no convincing evidence and that the quality of accounting has improved since the convergence to IFRS [5].…”

Serbest Muhasebeci̇ Ve Mali̇ Müşavi̇rleri̇n (Smmm) Müşteri̇leri̇ne Verdi̇kleri̇ Hi̇zmetlerdeki̇ Algilanan Hi̇zmet Kali̇tesi̇ni̇n Müşteri̇ Memnuni̇yeti̇ Üzeri̇ne Etki̇si̇ Ve Bi̇r Araştirma

“…There are several contributors to accounting information quality such as accounting information system, the standards used in financial reporting (Ciuhureanu, 2015) and competency of the accountant. However, Fuad, Juliarto and Harto (2019) state that implementing International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) does not have a significant effect on the quality of accounting information. Furthermore, Cussatt, Huang and Pollard (2018) also report that convergence to IFRS has not affected accounting information quality.…”