Choices in IFRS Adoption in Spain: Determinants and Consequences

Abstract

New Spanish GAAP based on IFRS came into force for separate financial statements in 2008. Companies were allowed to choose between 1 January 2007 and 1 January 2008 as their transition date. The first option commits companies to presenting comparative statements while the second allows them to disclose only the adjustments in equity. We analyze the determinants of companies that decided to choose early transition and also the consequences of this choice on the main accounting figures and ratios. Our results show that the determinants of the early transition date are size and growth. As for the consequences, there is a significant change in the accounting figures and ratios and therefore comparability may be impaired.

Acknowledgements

We appreciate the helpful comments of two anonymous reviewers, the participants of the 33rd EAA Annual Congress in Istanbul and the participants of the 2010 AAA Annual Meeting in San Francisco. This study has received financial support from the Spanish Department of Science and Technology (Plan Nacional de Investigación Científica, Desarrollo e Innovación Tecnológica 2010–2013, Programa de Ciencias Sociales, Económicas y Jurídicas (Economía), code: ECO 2010-18967).

Notes

These recommendations were compiled in the Libro Blanco, published by the Spanish Government in 2002 (Instituto de Contabilidad y Auditoría de Cuentas, 2002).

Royal Decree 1514/2007 includes the legal text of the New Spanish Chart of Accounts (Plan general de contabilidad de 2008), which has been in force since 1 January 2008.

Comparability is one of the qualitative characteristics of financial statements included in the Conceptual Framework in the revised version (IASB, 2010).

With the exception of financial companies, which are not regulated by Royal Decree 1514/2007.

See IFRS 1, paras. 6–36.

In the Appendix, we have summarized the main differences between Spanish GAAP prior to IFRS and Spanish GAAP adapted to IFRS. To mention but a few examples, we can see how some items previously considered assets are now adjusted (formation and legal expenses, for example) while some new assets may now be recognized in the balance sheet (rentals, for example).

In 2005, all consolidated companies had to adopt IFRS. However, the separate statements corresponding to these consolidated groups' parent companies were not allowed to adopt IFRS and, therefore, have had to wait until the Spanish Government passed the new Spanish IFRS-based GAAP in 2008. That is why we chose those companies as our sample.

In Spain, both financial institutions and assurance companies have specific regulations that are different from the general accounting regulations analyzed in this paper.