Do IFRS Adoption Enhance the Financial Reporting Quality of DFM Listed Companies

Abstract

Different accounting standards may lead to differences in financial reporting and its quality even with same set of accounting data. Previous studies acquired through cross-country analyses show that the adoption of International Financial Reporting Standards (IFRS) improves considerably the financial reporting quality and comparability and thereby favorable economic consequences. In this research, we try to assess whether the quality of the financial reporting of listed non-financial companies in Dubai Financial Market (DFM) has been improved after the adoption of the IFRS or not. More precisely, we look in this research to the five fundamental characteristics of the accounting information, which are: (1) relevance, (2) faithful representation, (3) understandability, (4) comparability and ( 5) timeliness. For this purpose, we used a qualitative approach developed by the Nijmegen Centre of Economics (Nice). Our sample consist of all nonfinancial companies listed on DFM observed over the period from 2015 to 2018. By all counts, our research finding provide evidence that it is no wonder that the adoption of IFRS has increased the quality of financial reporting from year to year. The outcomes proved that the qualitative factors of relevance, understandability, and comparability level increased considerably after IFRS adoption. The findings of this paper could lead to high level of awareness about the importance of financial reporting quality. Higher level of IFRS compliance play a significant role in attracting global investors' interest to the local markets, especially in a developing country like the UAE.

The Comparability of Financial Information in Insurance Companies Using NiCE Qualitative Characteristics Measurement

“…The introduction of IAS/IFRS standardises the financial reporting of businesses, leading to an enhanced standard and quality of the information disclosed and helps decision-makers to better understand the financial statements of competitors. This is corroborated by research by Almehairi et al, Jibril, Young and Zeng, Cascino and Gassen, and Yurisandi and Puspitasri, among others [2][3][4][5][6].…”

“…The assessment of financial statement comparability by NiCE relied on an original qualitative index. It continued to be utilised by: Yurisandi and Puspitasari and Almehairi et al, among others [2,6]. Their research addressed enterprises other than financial institutions.…”

“…Healy et al, Leuz and Verrechia, and Daske et al [22][23][24] show the adoption of IASs/IFRSs has helped reduce the asymmetry of information by enhancing the quality of financial reporting. This is upheld by Almehairi et al [2], who studied 20 companies tracked from 2015 to 2018. Their methods are based on the index of financial report quality assessment developed by NiCE.…”

“…Comparability can also reduce the cost of obtaining information and make it more accessible [1]. Research into the comparability of financial reporting normally relates to the impact of reporting standards on the new ways of presenting financial information, e.g., [2][3][4][5][6], and confirms improvements to its quality. Existing research has covered business groups in a variety of industries, though chiefly non-financial enterprises.…”

“…Our methods are based on the NiCE index of financial report quality assessment described by Beest et al [7]. Similar studies have been undertaken by, among others [2,6], though they did not address insurance companies. The NiCE research methodology is formalized and has a rating scale and described assessment rules, which ensures comparability of results.…”