IFRS adoption and accounting-based performance measures: evidence from an emerging capital market

Abstract

PurposeThis study aims to examine the economic consequences of the adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. More specifically, the study examines the impact of the mandatory adoption of IFRS on the accounting-based performance measures.Design/methodology/approachData on study variables were obtained manually from the published financial statements of 67 of listed companies in the Saudi stock market during the period 2014–2019. The study addressed the research hypotheses by comparing the accounting-based performance measures computed under the Saudi accounting standards for three years (2014–2016) before the mandatory adoption of IFRS and the corresponding three years (2017–2019) after the mandatory adoption of IFRS. The Mann–Whitney U Test was used to investigate the significance of differences between the values of performance measures in the pre- and post-mandatory adoption periods.FindingsThe findings of the study revealed that there were no significant differences between the values of accounting-based performance measures related to the three performance categories (i.e. profitability, liquidity and leverage) in the post-mandatory adoption period (IFRS) compared to the values of these measures in the pre-mandatory adoption period (Saudi accounting standards).Research limitations/implicationsThe results of the study indicated that there is a good convergence between the Saudi accounting standards that were implemented before 2017 and the IFRS that began to be applied starting from 2017. This convergence resulted in a low significant impact of IFRS on the financial statements of companies and then on the accounting-based performance measures calculated from them. However, this study suffers from some limitations, the most important of which is the small sample size as a result of the small number of listed companies in the Saudi market during the study period.Originality/valueAlthough the impact of the adoption of IFRS have always been a subject of intense research in developed countries, the study of the impact of the adoption of IFRS in developing countries still limited. This study contributes to the literature by examining the economic consequences of adopting IFRS in Saudi Arabia as one of developing countries.

Digital accounting system and its effect on corporate governance: An empirical investigation

“…Accounting standards in all countries aim to enhance accounting effectiveness. There are arguments that IFRS adoption leads to a significant improvement in the effectiveness of accounting in terms of transparency, reliability, and comparability (Ebaid, 2022; IFC, 2016; Jeanjean & Stolowy, 2008; Uyar et al, 2017). Financial reports, prepared under accounting standards, are the basis for assessing the financial position of firms (Ebaid, 2022).…”

“…There are arguments that IFRS adoption leads to a significant improvement in the effectiveness of accounting in terms of transparency, reliability, and comparability (Ebaid, 2022; IFC, 2016; Jeanjean & Stolowy, 2008; Uyar et al, 2017). Financial reports, prepared under accounting standards, are the basis for assessing the financial position of firms (Ebaid, 2022). Since CG cares a lot about the quality and integrity of corporate financial reports, IFRS adoption is expected to affect CG positively.…”

Systematic Literature Review: Adopsi Ifrs Mempengaruhi Laporan Keuangan Di Negara Muslim

“…Penentang gerakan cepat menuju IFRS berpendapat bahwa IFRS tidak berkembang baik dibandingkan dengan standar akuntansi domestik, atau US GAAP, dan standar IFRS juga memberikan lebih banyak kelonggaran bagi manajer untuk terlibat dalam manajemen laba mengingat standar IFRS berbasis prinsip dan bukan standar yang berbasis aturan (Chamisa et al, 2012;Shuraki et al, 2020). Permasalahan lainnya apabila IFRS diterapkan di negara muslim, ada beberapa negara muslim mengharuskan pencatatan keuangan didasarkan pada prinsip syariah, dimana jika prinsip syariah pendapatan yang di masa datang atau sifatnya belum pasti dilarang diakui oleh sistem syariah, sedangkan di konvensional hal itu diperbolehkan (Ebaid, 2022).…”

“…Berbeda dengan pengunkapan standar keuangan di Arab Saudi dimana Organization of Certified Public Accountants (SOCPA) sebagai lembaga yang bertanggung jawab untuk menerbitkan dan mengembangkan standar akuntansi dan audit menyetujui adopsi IFRS sebagai standar akuntansi transisi Internasional dalam mempengaruhi laporan keuangan perusahaan. Lembaga SOCPA berpendapat bahwa transisi ke standar IFRS berakibat timbulnya informasi keuangan yang transparan, sebanding dan konsisten yang bisa dijadikan oleh para investor dalam mengambil keputusan investasi yang optimal (Ebaid, 2022). Beberapa manfaat utama yang yang akan dinikmati perusahaan setelah mengadopsi IFRS yaitu peningkatan investasi asing langsung, peningkatan kualitas pelaporan, transparansi dan komparabilitas.…”

A bibliometric review of IFRS adoption and compliance research in Africa

“…While empirical evidence on the effects of IFRS adoption exists in prior literature (Aveh and Awunyo-Vitor, 2017;Mukhlisin, 2017;Khlif et al, 2020;Ebaid, 2022;Jamaani et al, 2022;Gowry et al, 2023;Z avodn y and Proch azka, 2023), the findings cannot be generalized (Kim et al, 2012;Ben Slama and Klibi, 2017;Mita et al, 2018). The extant literature argues that differences in financial reporting environments exist across jurisdictions that adopt IFRS (Ezenwoke and Tion, 2020).…”