B y : E R S A T R I W A H Y U N I , P h D
U n i v e r s i t a s P a d j a d j a r a n B a n d u n g
IFRS GLOBAL DIFFUSION: HISTORY,
RHETORIC, IMPACT AND FUTURE’S
PERSPECTIVE
AGENDA
•
The Evo lutio n o f G lo b a l Ac c o unting Sta nd a rd
•
The Rise o f IFRS : The Tim e line
•
The Rhe to ric o f IFRS
•
The G o ve rna nc e Mo d e l o f IASB
•
The Rhe to ric : The C yc le o f IFRS Q ua lity Ma king
•
Ho w C o untrie s Ad o p t IFRS
•
The C o nse q ue nc e s o f IFRS Diffusio n
•
Do e s IFRS Diffusio n e nc o ura g e Ha rm o niza tio n o f ta x
rule s?
BACKGROUND
•
IFRS ha s b e e n d iffuse d to b e c o m e a n inte rna tio na l sta nd a rd o ve r the
p a st 15 ye a rs, the re a re b urg e o ning num b e r o f e m p iric a l stud ie s a b o ut
the inte nd e d a nd uninte nd e d c o nse q ue nc e s o f this g lo b a l re g ula to ry
c ha ng e (se e
Brüg g e m a nn e t a l., 2013
;
Ta rc a , 2012
fo r a n o ve rvie w)
•
So m e re se a rc h p ro vid e s e vid e nc e tha t IFRS p ro d uc e s b e tte r q ua lity
a c c o unting info rm a tio n c o m p a re d to lo c a l
G AAP (
Ba rth e t a l., 2008
;
Ho rto n e t a l., 2013
;
Da ske e t a l., 2008
;
Le e e t a l., 2008
)
•
If c o m p a nie s c o nve rt fro m US G AAP to IFRS, a c c o unting q ua lity
d im e nsio ns ha ve b e e n fo und to re m a in unc ha ng e d
(
Ba rto v e t a l., 2005
;
Le uz, 2003
)
o r e ve n d e te rio ra te
(
Va n d e r Me ule n e t a l., 2007
;
Ba rth e t
a l., 2012
)
•
IFRS a s a hig h q ua lity sta nd a rd is a n im p o rta nt rhe to ric fo r IFRS g lo b a l rise
(Be sid e the lo we r o f c o st o f c a p ita l)
•
US G AAP use d to b e the m a in re fe re nc e fo r m o st c o untrie s in d e ve lo p ing
the ir a c c o unting sta nd a rd s b e fo re a d o p ting IFRS
•
Ho w IFRS wa s a d o p te d a nd institutio na lise d in to the c o untrie s with the
p a st c lo se re la tio nship to US G AAP?
IFRS DIFFUSION AND ADOPTION:
WHAT DO WE KNOW SO FAR?
•
IFRS d iffusio n w a s hig hly influe nc e d b y
•
Asia n Fina nc ia l C risis 1997
G 7
FSF
ne w fina nc ia l infra struc ture
•
EU a d o p tio n in 2005
Austra lia , Philip p ine s, Ho ng Ko ng , So uth Afric a
•
US SEC d e c isio n in 2007 a llo wing IFRS fo r fo re ig n p riva te issue rs
•
C o e rc ive iso m o rp hism is a c o m m o n e xp la na tio n fo r the c a se
o f IFRS a d o p tio n e sp e c ia lly in d e ve lo p ing c o untrie s.
•
Pre ssure fro m inte rna tio na l d o no r o rg a nisa tio ns suc h a s the
Wo rld Ba nk, the Asia n De ve lo p m e nt Ba nk, the IMF a nd the EU
ha d b e e n a m a jo r c a use fo r d e ve lo p ing c o untrie s to a d o p t
IFRS, suc h a s in the c a se o f Ba ng la d e sh, Pa kista n, Eg yp t,
Ka za khsta n, Ro m a nia a nd Zim b a b w e (
Alb u e t a l., 2011
;
1973, IASC established 1987, IOSCO-IASC First project
1993 IOSCO-IASC
Revision project 1997-1998 Asian Crisis
2000, IOSCO endorsement 2002 EU decided to
adopt IFRS by 2005. Convergence project starts between IASB and
FASB 2005, IFRS adoption by
EU, and some countries* 2007 US SEC allowed
IFRS for foreign issuers
2008 Global Financial crisis
2012,
Some countries adopt IFRS for the first time**
IASB-FASB convergence ended.
Time Line of IFRS Diffusion World Wide
The Objective
7
The IFRS Foundation and the IASB are dedicated to
developing and sustaining a single set of
globally
accepted accounting standards
:
Aimed at
providing high-quality, transparent and comparable
information
for investors and other users of financial information
Providing the world’s integrated capital markets with a
common
language for financial reporting
Promoting capital market stability through the
transparency and
integrity of financial reporting
Taking appropriate steps with regulators and standard-setters to help
promote
consistent application of standards
3
Why Global Standards are Needed
8
Accounting standards evolved nationally because
companies borrowed and investors invested only in
their home country
Globalisation is inconsistent with multiple, national or
regional accounting languages that
hinder
comparability
Corporations must consolidate global network of operations
Investors seeking diversification and return increasingly invest
outside domestic markets
Why Global Standards: Benefits to Capital
Markets
9
Transparent financial markets and free
trade require a high-quality, single, global
accounting language
Credibility of local market to foreign investors
Greater cross-border investment
Efficient capital allocation
Comparability across political boundaries
Facilitates global education and training
5
Why Global Standards: Benefits to
Companies
10
In the long run, global standard benefit companies
– especially multi-nationals
Lower cost of capital
Integrated IT systems
Easier consolidation
One set of books
Assist in raising capital overseas
Understand financial statements of overseas
suppliers, customers, subsidiaries
The Cycle of IFRS Quality Im age Makin g
12
IFRS as a high quality
global accounting
standard
Prom oted by
International Bodies
Early Adopters Countries and
J urisdictions adopt not for
quality reason :
e.g. Europe, Philippines
Late Adopter Countries see
the widespread adoption of
IFRS as an evidence of IFRS
high quality
e.g. Canada, Brazil, Indonesia
As m ore countries adopt,
the IFRS quality im age is
enhanced and IFRS
Actors engaged in the process
13
The Role of Actors
Example of Actors in
the International Arena
Example of Actors in the
National Arena
How do Countries Adopt IFRS?
14
Harmonization
Period
Decision
Period
Transition
Period
Implementation
Period
Differen t form s of In stitution al Work
Disruptive Work
• Underm ining the ‘localism ’ logic of the old accounting standard • Disrupting the full adoption of
IFRS
• Prohibiting the continued use of US GAAP
Creating Work
• IFRS as a high quality accounting standard: Im age-m aking processes • Reconfiguration of belief
system s
• The creation of com petition logic
Maintaining Work
• Resisting IFRS and m aintaining US GAAP • Maintaining the IFRS
adoption decision:
Reinvented the new actors • Maintaining full IFRS
adoption
15
Institutional work : “the
purposive action of individuals
and organisations aim ed at
creating, m aintaining and
disrupting institutions
”.
(Lawrence
and Suddaby 20 0 6)
Why IFRS was Chosen over the Alternative?
Respon den ts agreed that IFRS an d US GAAP are good quality
accoun tin g stan dards.
IFRS was chosen than the altern atives, for:
1.
In tern ation al recogn ition (Becom e m em ber of IFRS global
society) an d en dorsem en t from in tern ation al bodies
(IOSCO, IFAC, G20 , World Ban k)
2.
Efficien cy reason . Developin g their own un ique stan dard
is expen sive
3.
More in clusive due process to in clude a wider audien ce
while US GAAP on ly cater US stakeholder’s in terest
4.
Retain / im prove their in fluen ce in the IFRS m akin g aren a
Consequences of IFRS Diffusion
17
Chan gin g Role of Nation al Stan dard Setters
IFRS diffusion also push the FASB/ IASB m odel to diffuse.
FASB/ IASB logic : quasi-judicial, techn ical-expert,
in depen den t.
E.g : J apan , Brazil, Korea,
Recen t charter between IASB an d IFASS about the “A m odel
for Nation al Stan dard Setter”
New Player in the In tern ation al field : Region al
Group of Stan dard Setters.
IFRS Diffusion an d H arm on isation of Tax Rules
18
No eviden ce of global m ovem en t to harm on ise the
tax rules
It is difficult to lobby the tax harm on isation at the
in tern ation al level due to the absen ce of an
in tern ation al association of tax authority
Man y coun tries do n ot have sign ifican t chan ge in
their tax rules after IFRS adoption
(Mulyadi, Soepriyanto, Anwar,
20 12)
Conclusions
•
The decision making of IFRS adoption is a complex political
process and sometime take several years to make.
•
The mechanism of the adoption, the dynamics of IFRS
adoption creates several patterns of IFRS adoption process
which are unique one another
•
The quality of IFRS is not very important reason to adopt IFRS
•
IFRS diffusion bring institutional consequences to the national
and international regulatory field
Online sources:
•
www.iasplus.com
: website by Deloitte
•
www.ifrs.org
: IASB website
•
IFRS.wiley.com : for technical articles
•
http://www.accountancyage.com/
for accounting and
business news in UK
•
http://www.accountingtoday.com/
for accounting and
business news in US
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