The effects of IFRS adoption: A review of the early evidence

Abstract

This review documents the conceptual, methodological and policy issues that relate to the domain of financial reporting research that attempts to examine whether there are measurable gains, (if any) stemming from the adoption of international financial reporting standards, (IFRS). It selects and reviews four recent papers from conceptual, research design and policy perspectives. Information content, uncertainty-disclosure, value relevance, and earnings and accounting quality studies have all attempted to show the benefits of finer and increased information environments. Notwithstanding the early evidence, this review argues that the papers face both epistemological and research design problems, in that IFRS adoption effect studies do not take cognizance of the contributions of the literature on behavioral finance, financial integration, project analysis, regulation, earnings sustainability and market microstructure. In addition, the studies ignore the possibility that the greater percentage of the benefits and costs may not be directly observable. The review is done against the backdrop of the recent financial crisis.

Key Words:

• IFRS
• IAS
• Financial integration (globalization)
• regulation
• short term market reaction studies
• supply chain financial reporting system
• disclosure
• sustainability
• microstructure
• value relevance and endogenous variable