IFRS Impact on Accounting Quality in Telecommunications Industry

Abstract

Globally, the use of the IFRS in financial reporting is the requirement in many countries. However, the question of whether such a global transition towards a single set of accounting standards has been met by the presumed benefits of higher accounting quality and comparability yet remains unanswered. This paper primarily examines the effect of the mandatory IFRS adoption in Canada by the Canadian telecommunication companies. Since this research is an empirical study, this research has adopted quantitative research method. That is, by conducting survey, it has collected archival data from the eight large telecommunication companies of Toronto Stock Exchange (TSX/S&P) index. It was a comparative study between the Canadian GAAP financial reporting from 2008 to 2010 and IFRS financial reporting from 2011 to 2012. The research question of this research study is: Does IFRS adoption in the Canadian financial institutions improve financial reporting quality? This research finds that the adoption of the IFRS in telecommunication companies have resulted in lower persistency and predictability in earnings; increase in earnings influence to shareholder value; negative volatility in market price; better predictability of cash flow and financial forecasts; decrease in accruals and timeliness loss of recognition; increase in fair market valuation; significant increase in value relevance; increase in valuation usefulness of earnings to BVPS; and increase in operating capability and predictability.

Keywords: IFRS, GAAP, accounting quality, financial reporting, organizational performance, income smoothing, accruals, predictability, reporting aggressiveness, timeliness loss recognition