A Synthesis of Empirical Research on International Accounting Harmonization and Compliance with International Financial Reporting Standards  

Oleh:

Ali, Muhammad Jahangir

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Journal of Accounting Literature vol. 2005 no. 24 (2005), page 001-052.
Topik: Public Sector Accounting; PSA; International Financial Reporting Standards; IFRSs
Fulltext: JAL 05 24 001.pdf (3.6MB)

Isi artikel

The purpose of this paper is to synthesize the empirical studies on harmonization of accounting and reporting practices and compliance with international financial reporting standards (IFRSs) which have been extensively discussed and debated in the international accounting literature. Over the last two decades, companies and investors are increasingly pursuing business and investment opportunities around the world due to the globalization of capital markets, regional and international cooperation among countries and increasing international trade. These have created new problems among practitioners [Adhikari et al. 2002]. One of the major problems is accounting diversity which has been highlighted in various research studies over the years. Choi and Levich [1991] show that diversity in financial reporting affects capital market participants. As a result of the increased awareness of such diversity, attention was drawn to the need for international harmonization of accounting practices. In particular, national accounting differences may cause great problems for those companies that prepare financial statements domestically and seek capital from different countries. In the absence of universally acceptable set of accounting standards, these companies are required to undertake complicated and costly exercises in recasting or restating the financial statements prepared in accordance with their domestic generally accepted accounting principles (GAAP) to comply with the listing requirements in other jurisdictions. Differing accounting and reporting requirements around the world are also a source of great dilemma for the investors and financial analysts who are interested in comparing the financial performance of companies doing similar businesses but are located in different countries [Saudagaran 2000]. The remainder of this paper is structured as follows. Section 2 illustrates the policy debate surrounding harmonization while section 3 presents the concepts of harmonization. Survey and classification of financial accounting studies are not discussed in the paper because such studies are extensively re¬viewed by other researchers [see Meek and Saudagaran 1990; Chanchani and MacGregor 1999; d'Arcy 2001]. However, no studies have extensively reviewed international accounting harmonization and compliance with IFRSs studies. This gap is addressed by sections 4-6. Employing the theoretical framework, section 4 focuses on empirical studies on material (de-facto) harmonization and section 5 is concerned with formal (de-jure) harmonization studies. Compliance with international financial reporting standards is reviewed in section 6. Section 7 concludes the paper with suggestions for future research.

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