Understanding IFRS Adoption: A Review of Current Debate and Consequences

Abstract

The adoption of IFRS was intended to improve accounting information quality and ensure greater comparability and transparency of financial reporting around the world. This review has sought to recognize and understand the impacts of IFRS adoption on numerous areas of capitalism. Overall, the implementation of IFRS has been a great success reducing information asymmetry, improving the quality of information for users, enhancing transparency and comparability and positively impacting on capital markets. Generally, the positive effects of IFRS have been associated with firms in strong enforcement regimes that have had incentives to comply. Enforcement of IFRS was a recurring theme throughout the literature reviewed, and consequently, is an area that requires further development. To elaborate, there is a need to develop a mechanism for the enforcement of accounting standards. To this end, there is also a need for collaboration between standard setters and regulatory bodies across the world to maximize the effectiveness of international accounting standards.