Diffusion of IFRS using innovation diffusion models

Abstract

Purpose

This study aims to examine the diffusion pattern of International Financial Reporting Standards (IFRS) into the countries and identifies the channels of diffusion.

Design/methodology/approach

Data includes 98 countries that made a public commitment to IFRS adoption from 2000 to 2016. Adoptee countries are categorized based on Rogers’ adopter categorizations to understand country characteristics. Innovation diffusion models such as internal influence, external influence and bass diffusion that explain diffusion patterns are applied to the cumulative adoption of IFRS. Coefficients of internal and external diffusion are obtained using the models to explain the mode of diffusion pattern of IFRS. Further tests are done to identify the best model that explains IFRS diffusion.

Findings

Findings show that IFRS diffusion is a result of external influence through vertical communication from a centralized body (IASB) and internal influence due to imitation and interpersonal communication between countries. Imitation effect among the countries has a stronger effect on the IFRS adoption compared to the communication obtained from IASB.

Practical implications

Findings obtained can help standards-setting bodies, organizations and countries to understand the potential future of adopters and non-adopters. It facilitates the standard-setting bodies to manage IFRS diffusion by implementing measures to spread the word on the benefits of IFRS.

Originality/value

The study generates value by modeling a successive increase in the number of IFRS adoptee countries using empirical methods and identifies the reasons for the diffusion life cycle of IFRS.

Citation

Dayyala, N., Zaidi, S.K.R. and Bagchi, K. (2020), "Diffusion of IFRS using innovation diffusion models", International Journal of Accounting & Information Management, Vol. 28 No. 4, pp. 685-701. https://doi.org/10.1108/IJAIM-01-2020-0002