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Full IFRS and IFRS for SMEs Adoption by Private Firms

Empirical Evidence on Country Level

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Maximilian Saucke

The issuance of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) in July 2009 has mixed up the bipolar financial reporting landscape between Local Generally Accepted Accounting Principles (GAAPs) and Full IFRS by adding a third dimension to international GAAP choice. The study examines the characteristics and determinants of Full IFRS and IFRS for SMEs adoption by private firms in 110 countries. It finds empirical evidence for the continued existence of local versions of IFRS and the worldwide emergence of a two standard system. The findings also suggest that while Full IFRS adoption was mainly driven by network effects and political pressures, countries adopt the IFRS for SMEs notably due to cost-benefit considerations.
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4 Determinants of Full IFRS and IFRS for SMEs adoption

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4Determinants of Full IFRS and IFRS for SMEs adoption

4.1Research design

This chapter comprises the following three sub-studies:

(1) determinants of Full IFRS adoption by 2008,

(2) determinants of Full IFRS adoption by 2014, and

(3) determinants of IFRS for SMEs adoption by 2014.

As the three sub-studies are based on the same sample of 110 countries as the descriptive analysis in chapter three, primary data were obtained through the same e-mail-based survey sent to managing partners of Grant Thornton and PwC.172 In addition, secondary data were obtained from the World Economic Forum, Deloitte, the United Nations Statistics Division, the International Monetary Fund, and the World Bank.

Before presenting the empirical results, the following two sections present the methodological approach that is applied to (1) describe the group of Full IFRS and IFRS for SMEs adopting and non-adopting countries by 2008 and by 2014 and to (2) empirically test the hypotheses, which have been derived from the economic theory of networks and the institutional theory of isomorphism, via multivariate logistic regression.

4.1.1Descriptive analysis

In each of the three sub-studies, the sample is divided into two different groups of countries: IFRS adopters and non-adopters. Hence, the objective of the descriptive analysis is to identify differences between these two groups of countries in the central tendency of the collected data. To reveal these differences, the arithmetic mean is computed for all variables and for...

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