Regulation which is based on harmonization can be achieved in two ways. One, by reciprocity, meaning that for instance one country will adopt the standards of another and both will comply to these. The second way is by commonality, where a uniform set of standards is produced for both countries, covering issues of both countries. In both countries the domestic rules will be modified or replaced.
Limits to competition
Geiger (1998) beliefs that the regulatory system of competition has its limits in providing an efficient capital market mechanism.
Firstly, the information costs are greater in a regulatory system which is based on competition. Market participants have to be able to evaluate the advantages and disadvantages of all markets. This whole evaluation process brings along great costs. Due to these high costs of information, market participants have incomplete information which provides for an imperfect market.
Secondly, where competition assumes perfect mobility of market participants this is often not the case. Market participants have to comply to several regulatory requirements which provides them with extra costs. For this reason market participants will only make transactions abroad when the return will compensate for these extra costs. This makes the access to the capital markets unequal, where foreign investors have to bare greater costs than the domestic investors.
Thirdly, when a country misuses its market power it can gain for instance a monopoly position which reduces the efficiency of the system.
Fourthly, the agency theory can lead to situations within the competition system where managers do not choose the most efficient market from the shareholder’s perspective, but the market where their own wealth is maximised.
Finally, the competition for international listings can create a ‘prisoner’s dilemma’. Working together can create more welfare for society, but if one decides not to cooperate each state will try to attract foreign listings by making disclosure rules as attractive as possible. This might lead to a quality level of the disclosure rules, which is below the desirable standards and which will, due to competition, keep falling.
Harmonization as a solution
Harmonization might stand a chance in overcoming the limits of the current competition system in place (Geiger, 1998).
Firstly, uniform standards can provide economies of scale which will eliminate the information costs of diverse standards. Investors only have to be familiar with one set of rules. At the other end, issuers only have to disclose information once. This reduction in costs, together with more complete and accessible information is believed to improve the allocation of resources in the global market.
Secondly, harmonized rules do not require mobility for market participant as all barriers are eliminated.
Thirdly, no country is able to use its market power as all are obliged to the same rules and are not capable of exploiting any competitive advantage.
Finally, due to a global coordinator of the harmonized disclosure rules (as the IASC) there is no possibility to attract international listings to an individual system. Also the prisoner’s dilemma will be solved due to the global coordinator, as this body facilitates coordination among the different nations.
Geiger (1998) also puts forward other benefits in favour of harmonization. He argues that harmonization of disclosure rules can reduce cost of capital for the issuer by not needing to be listed on a foreign exchange to gather foreign capital, which safes registration costs. Furthermore there will be a continuous savings on periodic reporting for those who are listed on a foreign exchange, because the reporting requirements will be the same.
The investors will benefit from a reduction in cost of capital as well. The cost of information for a foreign investment will decrease. Besides that by ensuring a high level of disclosure a larger group of investors will be reached reducing agency costs.
Finally harmonization will remove barriers to competition by reducing investment barriers, making information cheaper and eliminating market power. Companies will find a greater playground for competition as they find easier access to foreign capital, while investors all have access to one set of the same documents costing less.
The effect of harmonization on the capital market
Above we have discussed the possible advantages of the harmonization system against the competition system. We will consider the research of Barth et al. (1999) in order to show the effects of harmonization on the security market performance.
Direct GAAP effect and expertise acquisition effect
Two forces play an important role in the affect of harmonization on the security market performance.
First of all Barth et al. (1999) introduce the ‘direct GAAP’ effect. This means that the change of measurement error of the domestic GAAP influences the aggressiveness with which investors trade within the public GAAP. The domestic measurement error can either be increased or decreased by harmonization. When the domestic GAAP has to harmonize with standards which allow for greater measurement error the domestic GAAP measurement error will increase (in accordance to the harmonized standards).
The second force is the ‘expertise acquisition’ effect. This defines the effect that harmonization has on costs and benefits for foreign investors to become familiar with domestic GAAP. When harmonization increases the measurement error of domestic GAAP it will decrease the cost of becoming an expert. A decrease in measurement error of domestic GAAP will mean that the changes rules are less stringent and give more room for interpretation making it easier for foreign investors to become an expert with the knowledge they already have from their own GAAP.
Effect of harmonization on expertise acquisition
With international differences in accounting rules, foreign investors are in disadvantage in interpreting a domestic GAAP report. When harmonization is achieved through an increase in GAAP measurement error, both experts and non – experts have less precise information giving a relative advantage to the expert in using this information. Thus an increase in expertise acquisition.
Effect of harmonization on security price information level
The performance of the price information of securities also depends on the earlier mentioned forces. When harmonization is achieved through greater measurement error in GAAP there is less information available in the economy which reduces the information illustrated through the price. Though in this situation the relative informational value of GAAP expertise increases. Meaning that less usefulness of the GAAP report (is increase in measurement error) increases reliance on individual expertise, in this context the price illustrates only expert’s information.
Effect of harmonization on trading volume
The study of Barth et al. (1999) show that harmonization achieved by a decrease in GAAP measurement error can result in lower expected trading volumes. Unfortunately, due to the nature of expected trading volume no explanations are provided.
Possible barriers in adopting harmonized standards
As addressed in the introduction Weirich, Avery and Anderson (1971) provide an overview of three different ways in international accounting: universal or world accounting, comparative or international accounting and parent-foreign subsidiary accounting and adjustment purposes.
We will analyse the problem of harmonizing international accounting standards by looking at various aspects concerned. We will begin by discussing the possible influence of social factors on harmonization, proceed on to the political factors and will conclude with a discussion of economic factors.
Social-Cultural Factors
Accounting is affected by its environment. This environment also includes the culture of the country in which it operates. Influence of cultural environment on accounting standards and practices has been examined by several studies (Gray, 1988; Perera, 1989). Perera argues that the IASs are strongly influenced by Anglo-American accounting models and that they tend to reflect the circumstances and patterns of thinking in a particular group of countries. According to him IASs are likely to encounter problems of relevance in countries where different cultural environments from those found in Anglo-American countries exist.
In 1988, Gray developed hypotheses on the association between accounting sub-cultural values and cultural dimensions developed by Hofstede (1980). Hofstede argues that culture includes a set of societal values that drives institutional form and practice. Culture affects the way individuals like their society to be structured and how they interact with its substructure, including accounting as one of those substructures. He defined and scored four basic dimensions of culture. These are individualism versus collectivism, large versus small power distance, strong versus weak uncertainty avoidance and masculinity versus femininity. The cultural dimension of individualism stands for a society wherein individuals are supposed to take care of themselves and their immediate families only. Power distance relates to acceptance of institutional and organizational authority by individuals. Uncertainty avoidance indicates the degree to which members of a society feel uncomfortable with uncertainty and ambiguity. And at last, masculinity stands for a preference in society for achievement, heroism, assertiveness and material success, whereas femininity stands for relationships, modesty, caring for the weak and the quality of life.
Gray applied the above mentioned dimensions of culture to explain differences in the behaviour of accountants all over the world and in the nature of accounting practices. He developed four pairs of contrasting accounting values. The first two, professionalism versus statutory control and uniformity versus flexibility relate to authority and enforcement. The other two, conservatism versus optimism and secrecy versus transparency relate to measurement and disclosure. By defining these values, he contributes to the classification of accounting systems. Differences in international classification may have significant implications for international harmonization. According to Gray, if policymakers consider cultural attributes of some countries, then they may be in a better position to predict problems that a country may be likely to face and identify solutions that may be feasible, given the experience of countries with similar development patterns. Taking this into consideration, it is likely that the IASs are developed in a manner that different aspects of cultural differences are implied in them.
We can formulate possible social-cultural related problems that IFRS can encounter by its implementation in various countries. One of these problems is the lack of strong professional accountancy bodies in some countries. This means that a body such as the IASC (International Accounting Standards Committee), which seeks to operate through the private sector, will not be effective in all countries. Another problem is the extent and degree of professional education and training systems for accounting. Education and training systems in developed and western countries are far more professional than in developing countries. Accountants in those countries will be sooner familiar with the new global standards than accountants in countries where the education degree of accountants is lower. Also the amount of accountants in a country is problematic. There is a shortage of accountants in developing countries. In these countries acceptance will take longer. The cultural attitude in a country toward professional groups can be a source of problem too. In countries where there is a negative attitude regarding professional groups it is expected that the acceptance of standards will be difficult. If we consider all the above we come to the following:
Political-Legal Factors
In addition to cultural values, Gray's (1988) model also suggests that institutional factors, such as legal systems, will have an influence on the development of accounting systems. There are similarities in certain critical aspects between legal systems of some countries. With the help of these similarities national legal systems are classified into two major families of law. Legal systems have been classified into civil and common law. Civil law, also known as Roman-Germanic law, is based on statutes and comprehensive codes and it relies on the opinions of legal scholars (Merryman, 1969). The common law is formed by the judges’ decisions on specific disputes and it includes laws that have been modelled on the basis of English law.
Findings of studies on the development of capital markets have provided evidence supporting the significant role of legal systems on the development of corporate ownership, corporate capital structure, and capital market (La Porta and Lopez-de-Silanes, 1998). These findings suggest that a country's legal system can be expected to have a strong impact on financial disclosures. In 2001, Jaggi and Low examined the influence of culture and legal systems on financial disclosures. They hypothesized that because legal systems are influenced by cultural values, the impact of cultural values on financial disclosures will be reflected through the country’s legal systems and their direct impact on financial disclosures would be minimal. Their findings provided evidence that the impact of cultural values on financial disclosures in common law countries is insignificant, but the results for code law countries provide mixed signals. Countries with common law have higher amount of disclosure than countries with a code law, but culture has no direct influence on disclosure. Culture has only an indirect influence via a legal system.
We already mentioned one obstacle for successful adoption of accounting standards, which is the difference in the legal systems and traditions of countries. Another obstacle, which is worth mentioning, is the difference in the political systems of countries. In a democracy for example, acceptance could be easier than in a dictatorship or an oligarchy. The extent of nationalism in a country can be also a problem. Nationalistic countries may be unwilling to accept compromises that involve changing accounting practices towards those of other countries.
Economic factors
Prior studies have indicated that financial disclosures are strongly influenced by corporate ownership, corporate capital structure and capital markets (Zarzeski, 1996). Zarzeski argued that in addition to cultural values, market forces would also have a significant impact on financial disclosures, and her findings supported her argument. As a result of internationalization of business and of capital markets, firms are challenged to meet the information needs of diverse groups of investors with different cultural backgrounds. Harmonization of accounting standards could be a necessity for these multinationals. The financial statements are prepared based on one set of standards in stead of different standards in different countries where the multinationals have subsidiaries.
The effect of economic consequences on accounting standards could pose a problem for harmonization. First of all one problem is the economic gap between developed and developing countries. The accounting standards are developed by countries which have a strong and stable economy, and most likely will not encounter problems which economies of developing countries are facing. Another crucial problem is that of comparability of financial statements due to the difference in accounting standards. This means that the statements that are composed according to the accounting standards cannot be compared to the statements of earlier periods. There will have to be additional costs of translating ‘old’ statements in conjunction with the new global accounting standards. We will mention differences in the user orientation of financial statements of countries as problematic too. In particular countries, these statements will only be prepared when there is a demand for it, to obtain a listing on some foreign stock exchange. The subsidiaries will prepare statements based on the national accounting standards. The demand is therefore limited, so the adoption of the global accounting standards will be slow.
Already reporting on IFRS basis – opportunities and pressures
As already mentioned in the introduction it is mandatory for all publicly quoted companies in the EU to be compliant with International Financial Reporting Standards with effect from financial periods beginning on or after 1 January 2005. Some of those companies have already started to report on the IFRS-basis. In the following we will give an overview of the reasons for this early compliance to the International Financial Reporting Standards.
Benefits of International Standards
McDonnel (2003) emphasizes globalisation of company activities as the main reason for early adoption of the IFRS.
Globalisation is inherent to accessibility (transparency) and comparability of financial information across country borders and accessibility of world capital market. Improved information and communication technologies have dramatically changed the financial reporting environment, reducing the barriers of physical distance and making information available globally. This has brought new international investors into the capital markets with an increasing demand for information on which investment decisions can be based. These investors are, however, not only interested in information produced by one company (accessibility of financial information), they want to be able to compare that company with its global competitors too (comparability of financial information). McDonell (2003) is convinced that the demand for international financial reporting standards that cross national borders is set to fulfil this role.
Already making the change to IFRS can lead to economic benefits for companies. Adopting a financial reporting language will enable the company to be understood in a global marketplace. Many early adopters have already found that it helps them to access world capital markets, reduce costs and benchmark themselves against international players.
Adopting IFRS allows multi-national groups to apply common accounting across their subsidiaries, which can improve internal communications, and the quality and timeliness of management reporting and group decision-making. At the same time IFRS can ease acquisitions and divestments through greater certainty and consistency of accounting interpretation. By increasing comparability and transparency, IFRS will greatly facilitate merger transactions, particularly across borders.
The impact of IFRS
The impact on businesses is another reason McDonnel (2003) addresses for early adoption of IFRS.
Converting to IFRS represents much more than a change in accounting rules. Companies must also address the wider implications of conversion. IFRS implementation will change the way people and processes work and could require decisive shifts in the strategic management of the business and its operations. IFRS compliance might have an impact on many areas such as:
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Changes in key performance indicators: Research showed that one company prepared its financial statements according to IFRS and was shocked to see that its return on investment appeared to have fallen from 16% to 3%.
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Income volatility: Another company found that when it restated earnings under IFRS its profits decreased by 80%.
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Employee remuneration: Between the effects that increased income volatility could have on the calculation of performance related pay, and the IFRS accounting treatment for pensions and stock option, significant changes may be required in a company’s remuneration policy.
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Financing and liquidity: IFRS has complex rules governing what constitutes debt and equity. These rules can result in equity-type instruments being reclassified as debt with a resulting impact on gearing and other financial ratios.
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Information gaps: Many companies find that their existing systems do not produce the information necessary for IFRS compliance.
Gaining competitive advantage
Blanchet (2002) argues that global standards offer new opportunities to companies and the need for IFRS is market driven.
The fundamental change in external reporting to significantly improve the way companies view and measure its performance internally as well as the way it communicates about itself externally, give rise to opportunities to take competitive advantage. There are two ways of dealing with fundamental changes: you can either ignore it as long as you can, and eventually react to it, or you can anticipate it, dominate it and turn it into a true competitive advantage. The conversion to IFRS is a first and important step in the journey towards the integration of global financial markets. Overall, companies should benefit from this integration. In Blanchet’s view, companies that position themselves on the opportunity side of this major change, rather than the compliance side, will realize competitive advantage earlier and more fully.
External pressures
Blanchet (2002) beliefs that the demand for IFRS is primarily market driven. This is shown by some companies contemplating new capital market transactions and experiencing pressure from investment banks and venture capitalists to provide IFRS-based information. The transparency and comparability afforded to investors can translate into preferential rates of interest and greater success in attracting investors. To maximise this opportunity when the results under IFRS appear less favourable, companies must be able to articulate the reasons for these differences.
Companies planning to divest a significant operation may be pressured by the potential purchaser to provide financial statements that are IFRS compliant.
Factors increasing the readiness to voluntarily adopt IFRS
The main target of the International Accounting Standards Committee (IASC) is to influence the practice of international accounting standards towards the harmonization of accounting systems in the intentional context; towards a world accounting. In the EU there is a large variation of accounting systems used. This variation is due to many factors that play a role in the acceptance of the international accounting standards. It is important to know which factors play a role so that the IASC can influence these factors towards a harmonization of accounting systems.
Categorizing accounting systems
It might be important to categorize accounting systems in order to evaluate the crucial factors which increase the readiness to voluntarily adopt IFRS.
If there is anything that characterises public accounting in the international context today, it is precisely the general introduction of significant reforms in the public accounting systems of many countries (Brusca & Condor, 2002). In the process of harmonization of international accounting standards a growing similarity of public and private accounting in different countries can be identified. But we can also detect that these similar guidelines are not always followed for the elaboration of the accounting information. Brusca and Condor (2002) compare the public accounting systems of different countries with the object of analyzing the degree of accounting diversity in the accounting practices of public entities in both the Anglo-Saxon and the Continental European areas. As is argued accounting diversity exists in a multitude of items, both in the balance sheet and in the results. By comparing these accounting systems, Brusca and Condor only dealt with essential aspects in characterizing an accounting systems. These aspects are: objectives, accounting recognition and measurement, financial reports and information dissimilation. Brusca and Condor aim to show the reason that can make accounting systems take different orientation using existing theory in the accounting literature and principally those in Lüders Contigency Model.
Evaluating direct participation capability
Standish (2003) evaluates national capacity for direct participation in international accounting harmonization through its principal current formal institutional forum, the International Accounting Standards Board (IASB), with France as a test. The objective of the research is to derive propositions for individual nations. Their indigenous accounting professions and other significant elements of their institutional framework might: (a) evaluate their present national capacity to contribute to international accounting harmonization: and (b) address policy issues relevant to development and deployment of capacity for effective engagement. Standish emphasizes the important position of the International Accounting Standards Board (IASB). Standish puts a necessary linkage between harmonization and regulation. The factors are directly related to the IASB structure and process for international accounting harmonization, given that the structure and process are intended to develop accounting standards acceptable in all countries of financial significance, for application in their jurisdiction by law or regulation.
Factors affecting IFRS adoption
We have learned that there are various factors that can influence the action of regulators, and various theoretical perspectives can be applied when making a judgment about the factors that will be more likely to impact on regulators ultimate decision to support or oppose particular accounting requirements (Deegan, 2000). Deegan considers that factors like language, culture, legal system, religion, etc. might have more influence in the financial reporting. Nobes (1998) has summarized reasons for international accounting differences. Both Deegan, Nobes and Standish consider factors that or not to specific and related to the financial report itself like Brusca and Condor use.
We will now discuss the factors considered by these authors to play a role in the difference of accounting systems. Taking into account that Brusca and Condor studied the accounting systems of the local sector, and Standish (2003) the local as well as the private sector.
A very important factor used by Nobes, Brusca and Condor is legal system. Brusca and Condor distinct between the countries whose legal system is based on Common law and those whose legal system has developed from Roman law. The first one is basically used in the Anglo-Saxon area en the second is found in the continental framework, where legal dictates are widespread and detailed. According to Brusca and Condor legal could be one of the origin of some of the differences between their public accounting systems. As the IASC standard setting processes have always been conducted solely in English, effective ability to communicate in English may be regarded as essential. Native English speakers dominate IASC staffing. The emergence of English-language competence at a profound level of conceptual understanding is an attribute for participation in international accounting. Anglo-Saxon countries are therefore more likely to be ready to voluntary adopt the IAS. The membership of the IASC members to a epistemic communities has been studied by Standish, and should be according to hem, be an essential attribute to participate in the International accounting standards. But is in our opinion not relevant to our case.
The evolution of accounting standard setting and its outcomes over the past forty to fifty years shows increasing interconnection between received theoretical concepts relating to financial accounting and financial information inputs to models of risk assessment and security pricing. Standish observed the knowledge base and shared discourse and came to conclusion that thorough understanding of financial accounting concepts primarily conceived and expressed in English, as well as related issues of application to harmonization and regulation is to be regarded as an essential factors for direct participation.
The levels of development of the accounting profession, which was considered by Nobes (1992) as the basis of the business sector accounting system can, according to Brusca and Condor, also be seen as a diversity factor in the public sector. They concluded that the accounting profession has had a considerable influence in the Anglo-Saxon countries but has played a more passive role in most Continental European countries. Standish has also considered professional expertise as a factor for participation in the IAS. But his position was clearly that from the big – 4 accounting and auditing firms point of view of the IASC. Although in principle it is to be expected that the potential users if the financial reporting will be the same in countries, the importance given to them is not always the same.
Brusca and Condor looked at the principle user of the financial reporting and concluded that in the Anglo-Saxon countries the importance is given to the general public and the suppliers of the resources, trying to give accountability not only in financial terms but also in terms economy, efficiency and effectiveness. On the other hand, in most continental European countries more importance has been given to legislative and oversight groups. Such as the Parliament and the Government. Depending on what type of borrowing is employed, the financial resource suppliers will exert more or less influence. The study of Brusca and Condor suggests that financial resource suppliers has an impact on the diversity on financial accounting. These findings were also found by Lüder (1994a). In his study he identified the capital market as one of the factors that can condition accounting reforms. For example, the role of rating agencies as information users can have important results. Brusca and Condor made a distinction between the two the Anglo – Saxon and the European continental. This distinction made clear that in contrast with the Anglo – Saxon capital market, the European continental capital market has not conditioned the development of the accounting system.
Managing the change towards IFRS
We have analysed effects, consequences, benefits and costs of the harmonization of accounting standards from different perspectives. Financial reporting on IFRS - basis will be compulsory for all listed companies of the EU member states as from the 1st of January 2005. We can hold an ongoing analysis of this process but in the end the listed companies will need to meet the set regulations. Therefore it is interesting to look at studies who actually focus on the change process which will incur.
McDonnel (2003) shows that experience strongly suggests that major conversions to IFRS can take 18 months or more, and less complex conversions can take between 6 and 12 months. Early adoption gives companies the opportunity to anticipate on challenges, manage outcomes, and implement the best solutions. The amount of changes in the business will not be known until an initial impact study has been completed. Beginning IFRS conversion work in an early stage means companies can anticipate and resolve issues before the new requirements are enacted. Senior management will have time to understand the full impact of IFRS on the company and can develop the messages appropriate for investors, employees, and the marketplace.
The key areas to be addressed include:
- Effective management of impact on the business:
On conversion to IFRS it is necessary to manage the changes to the numbers.
- Changing the information systems:
Systems and process changes need to be managed on a proper way. The amount of systems changes required will depend on the size and complexity of the business.
- Managing resources and people:
Companies might be underestimating the volume and complexity of work required. One of the most difficult aspects of a conversion project is to get the right people; IFRS accountants, project managers, taxation specialists, IT and systems people, and investor relation’s specialists. The level of resources required will depend on the impact of IFRS on the business.
Financial reporting requirements also require comparative information for 2004 to be presented in accordance with IFRS. Therefore, in order for a company to complete the complex task of converting to IFRS from its present financial reporting system in time to meet the 2005 deadline, it needs to begin the process now, if it has not already started.
Hypotheses deducted from the literature review
- What is the influence of the EU policy of prescribing IFRS to all listed companies to the functioning of capital markets?
Hypothesis:
The benefits of the harmonization of accounting standards such as the IFRS will contribute to a more efficient functioning of the capital markets.
- May economic, social and / or political factors impede a successful adoption of IFRS?
Hypothesis:
Cultural values, legal systems and market forces do, one to a larger extent than the other, impede in a successful adoption of IFRS.
- Why do some companies decide to already report on IFRS basis?
Hypothesis:
Market needs are the primary drivers for companies already reporting on IFRS basis.
- What country factors increase the readiness to voluntarily adopt IFRS?
Hypothesis:
The legal system, the financial resource suppliers, the professional expertise, the knowledge base and shared discourse and the principal user have an impact on the readiness to voluntarily adopt the IFRS.
- How can the change towards IFRS be managed?
Hypothesis:
Early preparation is essential in managing the change towards IFRS.
Summary
In this essay we have discussed the possibilities and difficulties of global accounting standards, which will mostly take the form of regulations as in EU directives. We did this, because in 2005 all publicly traded companies must adopt the International Financial Reporting Standards. We have examined existing literature on harmonization of accounting and tried to explain if there is a future for generally accepted accounting standards. We especially paid attention to the factors influencing the adoption of IFRS, the costs and benefits of harmonization and the consequences of harmonization.
First, we studied the effects of harmonization on the functioning of the capital markets. We assumed that harmonization of accounting standards will result in a more efficient functioning of the capital markets. Then we examined possible barriers in achieving adaptation of harmonized standards. From the literature we found that certain cultural values, legal systems and market forces could hamper the successful adoption of accounting standards.
Some companies already report on IFRS basis. We examined the reason why they do this and found that needs from the market drives companies to report on IFRS basis. We looked at particular country factors, which increase the readiness to voluntarily adopt IFRS. We found that the legal system, the financial resource suppliers, the professional expertise, the knowledge base and shared discourse and the principal user are all influential. Finally, we discussed how to manage the change towards IFRS and concluded that early preparation is essential.
Considering all the above mentioned assumptions, we expect that the accounting standards can globally be harmonized, but not standardized. Because there are significant political and economic differences between countries, harmonization will be difficult in the short-term. But in the long-run, we expect that the standards will incorporate these differences and more harmonization will be achieved. Nevertheless, we do not expect that in the near future there could be one set of globally accepted accounting standards.
Research Design
To answer our research question we will carry out an empirical research.. This empirical research consist of a desk and field research. With the desk research we will be able to treat some of our hypotheses and with field research the remaining ones. First, we will select a sample and collect financial data from governments as well as firms. Then we will perform factor analysis exploring firms operating in the stock exchange in different countries to examine the adaptation of the IAS. We will do so by a comparisons of the effect of accounting before the companies adapted to the IFRS and the effect after the adaptation. We hoop then to see the benefits of the harmonization We will also perform factor analysis exploring firms that have adapted the standards and compare them with firms that hasn’t adapted them. Doing this we will examine the factors we think have an influence.
By interviewing firms that already report of IFRS basis we will know why they have adapted the IFRS. Also we will interview companies that reports on GAAP and study the management they adapted to change toward a new report standards.
After having done a field research, we will make a model with criteria’s that will indicates whether a country/ company is ready adopt the International Accounting Standards. Then, a significant number of company through out the world will be interrogated using this model. Finally, analysing the data, it will be clear if there is future for a global set of generally accepted accounting standards.
A model of our research design :
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