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Full IFRS and IFRS for SMEs Adoption by Private Firms

Empirical Evidence on Country Level


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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5 Conclusions



5.1Main findings and implications

This study has analyzed the process of international accounting harmonization in the field of private firms in 110 countries between 2002 and 2014. In particular, it has aimed at answering the following two main research questions:

The first sub-study includes a time series analysis (2002–2014) and a cross-sectional analysis (2014). While the former presents the process towards Full IFRS and IFRS for SMEs adoption between 2002 and 2014, the latter provides a detailed description of the country-specific characteristics of Full IFRS and IFRS for SMEs adoption in the field of private firms in 2014.

First, the results from the time series analysis make aware of the fact that by 2002, the year the IASB started operations, only one third of the 110 sampled countries worldwide still provided domestic private firms with accounting standards that were entirely independent from those issued by the IASB. Instead, every second country had already converged their Local GAAP with Full IFRS to a small or medium extent and the remaining 20% had already adopted Full IFRS with or without minor modifications. This state of early convergence with IFRS is a surprising observation in the field of private firms as IAS and IFRS have initially been designed for the accounting of large listed multinationals only. The time series analysis clearly indicates though that IAS and IFRS already had a strong impact on domestic financial reporting systems for private firms by the early...

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