The Impact of International Financial Reporting Standards on Financial Reporting Quality: Evidence from Iraq

Iranian Journal of Accounting, Auditing and Finance

مقاله 2، دوره 5، شماره 2 - شماره پیاپی 15، مرداد 2021، صفحه 11-24   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2021.40229

نویسندگان

Ahmed Al-janabi¹؛ Reza Hesarzadeh^{* 2}؛ Mohammad Ali Bagherpour Velashani²

¹Faculty of Accounting, University of Kufa, Kufa, Iraq

²Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

چکیده

Prior studies provide mixed evidence on whether the transition to International Financial Reporting Standards (IFRS) deters or contributes to greater financial reporting quality. Thus, this research investigates how the transition affects financial reporting quality. This study measures financial reporting quality by earnings management and the value relevance of earnings. Using a sample of listed firms on the Iraq Stock Exchange during 2015–2019, the current study indicates no significant relationship between the transition to IFRS and earnings management. Further, the transition to IFRS positively affects the value relevance of earnings. Thus, collectively, the impact of the transition to IFRS is conditional to the proxies of financial reporting quality. This study contributes to the existing literature by providing empirical evidence regarding the impact of IFRS on financial reporting in an under-studied emerging market. This paper has important implications for regulators, standard setters, listed firms, and other stockholders. It shows that the transition to IFRS has positive effects even in firms from developing countries.

کلیدواژه‌ها

International financial reporting standards؛ Financial reporting quality؛ Earnings management؛ Value relevance of earnings؛ Iraq Stock Exchange

مراجع

1. Ahmed, A.S., Neel, M. and Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research, 30 (4): 1344-1372. https://doi.org/10.1111/j.1911-3846.2012.01193.x.
2. Al-Akra, M., Jahangir, A.M. and Marashdeh, O. (2009). Development of accounting regulation in Jordan. The International Journal of Accounting, 44(2), 163–186.
3. Ball, R. (2016). Why we do International Accounting Research. Journal of International Accounting Research, 15(2), 1–6. https://doi.org/10.2308/jiar-51403.
4. Barth, M.E., Landsman, W.R., Young, D. and Zhuang, Z. (2014). Relevance of differences between net incomes based on IFRS and domestic standards for European firms. Journal of Business Finance & Accounting, 41(3/4), pp. 297-327. https://doi.org/10.1111/jbfa.12067.
5. Bhattacharya, U., Daouk, H. and Welker, M. (2003). The world price of earnings opacity. The accounting review, 78(3), pp. 641-678. https://doi.org/10.2308/accr.2003.78.3.641.
6. Brown, P. (2011). International Financial Reporting Standards: What are the benefits?. Accounting and business research, 41(3), pp. 269-285.
7. Brown, P. (2013). Some observations on research on the benefits to nations of adopting IFRS. The Japanese Accounting Review, 3(2013), pp. 1-19.
8. Burgstahler, ,  Hail,  L.  and  Leuz,  C.  (2006).  The importance of reporting incentives: Earnings management in  European  private  and  public  firms. The  Accounting  Review,  81(5),  983-1016.  doi: 10.2308/accr.2006.81.5.983
9. Christensen, H.B., Lee, E., Walker, M. and Zeng, C. (2015). Incentives or standards: what determines accounting quality changes around IFRS adoption?. European Accounting Review Forthcoming, 24 (1), 31–61. https://doi.org/10.1080/09638180.2015.1009144.
10. Chua, W. F. and Talor, S.L. (2008). The rise and rise of IFRS: An examination of IFRS diffusion. Journal of Accounting and Public Policy, 27(6), 462–473. https://doi.org/10.1016/j.jaccpubpol.2008.09.004.
11. Chua, Y. L., Cheong, C.S. and Gould, G. (2012). The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia. Journal of International accounting research, 11(1), 119-146.
12. Coalition Provisional Authority (2004). Coalition Provisional Authority Order Number 74: Interim Law on Securities Markets. Retrieved from http://www.iraqcoalition.org/regulations/20040419_CPAORD_74_Interim_Law_on_ Securities_Markets_pdf.
13. Cole, V., Branson, J. and Breesch, D. (2012). Determinants influencing the De Facto comparability of European IFRS financial statements. Accountancy & Bedrijfskunde, 32 (1), 21–40. https://doi.org/10.2139/ssrn.1967001.
14. Daske, H., Hail, L., Leuz, C. and Verdi, R. (2008). Mandatory IFRS reporting around the world: Early evidence on the economic consequences. Journal of Accounting Research, 46(5), 1085–1142. http://dx.doi.org/10.1111/j.1475-679X.2008.00306.x.
15. Dawisha, A. (2005). The prospect for democracy in Iraq: Challenges and opportunities. Third World Quarterly, 26(4–5), 723–737.
16. Doupnik, T.S. and Richter, M. (2003). Interpretation of uncertainty expressions: a cross-national study. Accounting, Organizations and Society, 28(1), 15–35. https://doi.org/10.1016/S0361-3682(02)00010-7.
17. Filip, A. and Raffournier, B. (2014). Financial crisis and earnings management: The European evidence. The International Journal of Accounting, 49(4), pp. 455-478.
18. Foote, C., Block, W., Crane, K. and Gray, S. (2004). Economic policy and prospects in Iraq. Journal of Economic Perspectives, 18(3), 47–70. https://doi.org/10.1257/0895330042162395.
19. Gu, Z., Ng, J. and Tsang, A. (2019). Mandatory IFRS adoption and management forecasts: The impact of enforcement changes. China Journal of Accounting Research, 12(1), pp. 33-61. https://doi.org/10.1016/j.cjar.2018.09.001.
20. Hail, L., Leuz, C. and Wysocki, P.D. (2010). Global accounting convergence and the potential adoption of IFRS by the U.S. (part I): Conceptual underpinnings and economic analysis. Accounting Horizons, 24(3), pp. 355-94. https://doi.org/10.2308/acch.2010.24.3.355.
21. Hellman, N. (2011). Soft Adoption and Reporting Incentives: A Study of the Impact of IFRS on Financial Statements in Sweden. Journal of International Accounting Research, 10(1), pp. 61-83. https://doi.org/10.2308/jiar.2011.10.1.61.
22. Iraqi Board of Accounting and Auditing Standards (IBAAS) (1997a). Iraqi Accounting Rules, 1–97.
23. Iraqi Board of Accounting and Auditing Standards (IBAAS) (1997b). Iraqi Auditing Rules, 1–45.
24. Jang, J.I., Lee, K.J., Seo, Y.M. and Cheung, J.H. (2016). Economic consequences of IFRS adoption in Korea: A literature review. Journal of Applied Business Research, 32(6), 1649–1662. https://doi.org/10.19030/jabr.v32i6.9813.
25. Jeanjean, T. and Stolowy, H. (2008). Do accounting standards matter? An exploratory analysis of earnings management before and after IFRS adoption. Journal of Accounting and Public Policy, 27(6), pp. 480-494. https://doi.org/10.1016/j.jaccpubpol.2008.09.008.
26. Jones, J. (1991). Earnings Management during  Import Relief Investingations. Journal of Accounting Research, 29 (7), pp. 139-228.
27. Jones, V.C. (2004). Iraq's Trade with the World: Data and Analysis. Retrieved from http://www.fas.org/man/crs/ RL32025
28. Judge, W., Li, S. and Pinsker, R. (2010). National adoption of International Accounting Standards: An institutional perspective. Corporate Governance: An International Review, 18(3), pp. 161–174. https://doi.org/10.1111/j.1467-8683.2010.00798.x.
29. Kaddouri, S. (2011). The Development of the Accounting System in Iraq. Retrieved from http://www.iraqicp. com/2010-11-21-17-49-26/1175-2011-02-03-17-35-16.html.
30. Keister, O.R. (1963). Commerical record-keeping in Ancient Mesopotamia. The Accounting Review, 38(2), pp. 371–376. https://www.jstor.org/stable/242928.
31. Key K.G. and Kim J.Y. (2020). IFRS and accounting quality: Additional evidence from Korea. Journal of International Accounting, Auditing and Taxation, 39, 100306. https://doi.org/10.1016/j.intaccaudtax.2020.100306.
32. Kim, J.B., Liu, X. and Zheng, L. (2012). The impact of mandatory IFRS adoption on audit fees: theory and evidence. The Accounting Review, 87 (6), pp. 2061–2094. https://www.jstor.org/stable/41721924.
33. Leuz, C. (2010). Different approaches to corporate reporting regulation: how jurisdictions differ and why. Accounting and Business Research, 40(3), pp. 229-56. https://doi.org/10.2139/ssrn.1581472.
34. Liu, C., Yao, L.J., Hu, N. and Liu, L. (2011). The impact of IFRS on accounting quality in a regulatedmarket: An empirical study of China. Journal of Accounting, Auditing & Finance, 26, pp. 659-676.
35. Mongrut, S. and Winkelried, D. (2019). Unintended effects of IFRS adoption on earnings management: The case of Latin America. Emerging Markets Review, 38, pp. 377-388. https://doi.org/10.1016/j.ememar.2018.11.004.
36. Moura, A., Altuwaijri , A. and Gupta, J. (2020). Did Mandatory IFRS Adoption Affect the Cost of Capital in Latin American Countries?. Journal Pre-proof, 38(1), 1-38. https://doi.org/10.1016/j.intaccaudtax.2020.100301.
37. Nobes, C. (2006). The survival of international differences under IFRS: towards a research agenda. Acc. Bus. Res. 36(3), 233–245. https://doi.org/1080/00014788.2006.9730023.
38. Riahi‐Belkaoui, A. (2005). Earnings opacity, stock market wealth effect and economic growth. Review of Accounting and Finance.
39. Robson, E. (2008). Mathematics in Ancient Iraq: A Social History. Available at: http://www.ukessays.com/essays/ accounting/history-oil-accounting.php
40. Schipper, K. (2005). The introduction of international accounting standards in Europe: implications for international convergence. European Accounting Review. 14(1), 101–126. https://doi.org/1080/0963818042000338013.
41. Shubber, K. (2009). Iraq and the new oil frontier. International Journal of Islamic and Middle Eastern Finance and Management, 2(3) (Available at: http://www.emeraldinsight.com.ezproxy.lib.monash.edu.au/journals.htm?issn= 1753-8394&volume=2&issue=3&articleid=1806331&show=html).
42. Van Tendeloo, B. and Vanstraelen, A. (2005). Earnings management under German GAAP versus IFRS. European Accounting Review, 14(1), pp. 155-180.
43. Yousif, B. (2007). Economic restructuring in Iraq: Intended and unintended consequences. Journal of Economic Issues, 41(1), pp. 43–60. https://www.jstor.org/stable/25511155.
44. Zeff, S.A. (2012). The evolution of the IASC into the IASB, and the challenges it faces. The Accounting Review, 87(3), pp. 807–837. http://dx.doi.org/10.2308/accr-1024.