The International Politics of IFRS Harmonization

Abstract

The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of some international political dynamics of countries' IFRS harmonization decisions. The analysis is based on field studies in three jurisdictions: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize the jurisdictions' IFRS responses: proximity to existing political powers at the IASB; and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

International Differences in Accounting Practices Under IFRS and the Influence of the US

“…Australia and New Zealand both enjoy close cultural ties to the extant powers at the IASB, that is, the EU, and particularly Britain (Ramanna ). In , Bradbury (: 18) noted the move by New Zealand ‘towards harmonising with IASC and the Australian Accounting Standards Board (AASB), with a preference for Australian standards because of the similar social, economic and legal backgrounds’.…”

“…Canada is one of the richest and most developed countries in the world and this could lead to it being highly distinctive in its approach to IFRS harmonisation (as Australia and New Zealand seem to have been). It also enjoys, as do Australia and New Zealand, close cultural ties to the extant powers at the IASB (the EU and the UK) (Ramanna ). However, its economic ties to the US seem to be strong enough to have precluded such a development in terms of IFRS adoption.…”

Negative Tone in Lobbying the International Accounting Standards Board

“…In addition, discontent may be wrapped in positivity by negating the positive words. Tetlock (2007) and & 2013 note that positive word lists are of limited use for this reason. Measuring negativity circumvents the noise from using positive word lists and allows the analysis to capture even that part of the sample that avoids explicit opposition yet makes its discontent with the proposal known to the standard setter.…”

Rising Powers and Multilateral Institutions

“…Traditionally, the relationship between rising powers and the International Accounting Standards Board, or with the International Financial Reporting Standards (IFRS) issued by them, has not been a topic for academic study. Very recently, however, a debate has arisen concerning the determinants of the adoption and implementation of accounting standards by emerging markets (Nölke, 2013;Ramanna, 2013) and on the suitability of these standards for the latter (Biondi and Zhang, 2007;Baker et al, 2010;Walker, 2010). Nevertheless, the issue of rising power influence on IASB accounting standard setting is hardly explored.…”