The Need to Provide Internationally Comparable Accounting Information and the Application of IFRS: Empirical Evidence from German Private Firms

Abstract

Our study, which is based on a survey carried out among German private firms, aims to ascertain which characteristics determine private firms’ need for providing internationally comparable accounting information and whether or not those firms that perceive such a need actually apply IFRS voluntarily. The relevance of equity from foreign investors and inclusion within an international group are positively associated with this perceived need, whereas international operating activities and a firm’s size are not. Regarding the voluntary adoption of IFRS, both the perceived need and also the interaction between size and need are significant. Our results show that smaller firms, despite perceiving a need for providing their stakeholders with internationally comparable accounting information, often do not apply IFRS.

Keywords:

• international accounting
• private firms
• questionnaire survey
• small- and medium-sized firms
• voluntary IFRS adoption

Acknowledgements

The authors gratefully acknowledge helpful comments received from Benita Gullkvist and the participants of EUFIN 2013 in Valencia, the Accounting and Audit Convergence Convention 2013 in Cluj Napoca, the International Accounting Section of the American Accounting Association 2014 in San Antonio and the EAA 2014 in Tallinn. The authors also thank Axel Haller together with the Chair of Financial Accounting and Auditing at the University of Regensburg as well as the German Accounting Standards Committee (GASC) and the Federation of German Industries (BDI) for their help in funding the questionnaire survey.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

David Shirkhani http://orcid.org/0000-0002-8772-5447

Notes

1 In contrast, the study by Francis et al. (2008) shows a great variation of IFRS adoption rates between countries. However, Nobes (2010) attributes these findings to a misleading interpretation of the data gathered from the World Business Environment Survey.

2 Note, that besides these firm-specific factors, there are also country-specific factors influencing firms’ decisions to apply IFRS (Francis et al., 2008; Yang, 2014). However, these factors are irrelevant for our single-country study and are, therefore, not further discussed here.

3 This information can be used for both of the two (arguably conflicting) purposes of financial reporting: valuation/information and contracting/stewardship (Gjesdal, 1981; Gassen, 2008).

4 Note that the highest correlated variables used in the regression model are EXP and IMP (0.515) as well as EQ and BOR (0.526). The correlations between the other variables are lower, indicating that our results are not biased by multicollinearity (Kervin, 1992).

5 The control variables CMO and LEGAL were removed because of the corresponding eliminations from the sample (see Table 1). Furthermore, we removed the nonsignificant variable PROF and aggregated the four industry categories into three categories, thereby lowering the number of variables to account for the reduced sample size.

Additional information

Funding

This work was supported by German Accounting Standards Committee and the Federation of German Industries (BDI).