The Influence of Country, Industry, and Topic Factors on IFRS Policy Choice

Abstract

This paper proposes a framework for understanding management's decision-making on observable accounting policy choices. The framework is used to hypothesize how country, industry, and topic factors influence policy choice under International Financial Reporting Standards (IFRS). The hypotheses are tested on the choices made by the largest firms from 10 jurisdictions on a comprehensive set of IFRS policy topics, which are hand-collected from the financial statements. The results are consistent with the framework: country factors are particularly influential when the choice does not affect an important accounting number; and industry and topic factors influence the choice on some topics. Overall, we find that country factors have the greatest influence on IFRS policy choice.We continually review the content and presentation of our financial statements to ensure compliance with relevant accounting standards and regulations and also to consider their relevance and usefulness to readers. As a result of this ongoing review we have changed the format of our consolidated income statement from the nature of expense to the function format [. . .] We believe this revised presentation will provide users of our financial statements with a better understanding of our business.(Imperial Tobacco, Annual Report and Accounts 2007, p. 71)This quotation concerns accounting policy choice regarding the format of the income statement, which is one of several topics on which choice is available under International Financial Reporting Standards (IFRS). It illustrates how policy choice can be considered of practical importance by management on the grounds that it affects the relevance and usefulness of accounting information. As explained below, the literature shows that country, industry, and firm characteristics influence accounting policy choice. In their review of the research on accounting choice, Fields et al. (2001) concluded that a comprehensive theory did not exist. We aim Christian Stadler (International differences in accounting rules might be the main explanation for the country effect for the goodwill topic, and an important explanation for the LIFO topic.2 By 'free rein' we mean that a policy choice is specifically allowed by IFRS. There are some constraints in IAS 8 on changing the choice from one period to the next. A BAC U S

International Differences in IFRS Policy Choice and the Persistence of Accounting Classification: The Case of China

“…Such differences occur because despite the international standards, the preparers are still local and therefore influenced by local accounting practices. Such differences can be empirically found in the choices made by preparers regarding IFRS policy options (Kvaal & Nobes, 2010;Nobes, 2011;Nobes & Stadler, 2013;Stadler & Nobes, 2014). These differences, which are based on classes drawn up since the 1960s, lead us, once again, to find two separate groups: the Anglo and the Continental European.…”

Identifying the Classification of EU Countries by an Alternative Variable: The “Stakeholders’ Perception”

“…Despite the common use of international accounting standards, his findings show that remain the two traditional groups: 1) Anglo-Saxon (Australia, UK) and 2) Continental European (Sweden, Germany, France, Italy, Nederland e Spain). Later, also many other empirical analyses found that there are still a lot of relevant differences in applying IAS/IFRS (Nobes & Stadler, 2013) due both to various options and ambiguous interpretations (Kvaal & Nobes, 2010, 2012Nobes, 2006Nobes, , 2008Nobes, , 2011Nobes, , 2013Stadler & Nobes, 2014) and to the presence of label serious firms adopters (Daske et al, 2013).…”

“…Contrary to what one might suppose, many empirical analyses found that there are still a lot of relevant differences in applying IAS/IFRS. It is substantially due both to their principles-based approach that could allow various options and ambiguous interpretations (Ball, 2006;Kvaal & Nobes, 2010, 2012Nobes, 2006Nobes, , 2008Nobes, , 2011Nobes, , 2013Stadler & Nobes, 2014;Forst & Salerno, 2016) and to the presence of firms that adopt them more in name (-label firms‖), than as a part of a strategy to increase their commitment to transparency (-serious firms‖) (Daske et al, 2013).…”

Comparabilidade das Escolhas Contábeis na Mensuração do Imobilizado de Empresas Listadas na BM&FBOVESPA e na NYSE

“…Na identificação do principal determinante das escolhas entre práticas permitidas, o fator país tem sido o mais importante (Stadler & Nobes, 2014). Jaafar e Mcleay (2007) apresentam um contraponto e reinterpretam o conceito de harmonização, ao afirmarem que se presume que a contabilidade será completamente harmonizada quando todas as empresas, que operam em circunstâncias similares, adotarem idêntico tratamento contábil para transações similares sem considerar seu domicílio.…”