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Explaining IFRS reluctance with case study vignettes

Yu-Lin Hsu (Department of Accounting and Finance, University of Strathclyde, Glasgow, UK)
Gavin C. Reid (School of Economics and Finance, University of St Andrews, St Andrews, UK; Centre for Business Research, University of Cambridge, Cambridge, UK and ESSCA School of Management, Angers, France)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 14 March 2023

82

Abstract

Purpose

This study aims to analyze why listed Taiwanese firms uniquely rejected the early adoption of International Financial Reporting Standards (IFRS) in 2012. It investigates the underlying decision-making processes behind this policy reluctance to further understand the continuous phenomenon of rare voluntary IFRS adoption.

Design/methodology/approach

It reports on fieldwork evidence obtained in situ by in-depth interviewing in Mandarin. It uses qualitative methods, complemented by quantitative cost-benefit metrics of IFRS adoption. It presents five diverse illustrative case-study vignettes, using a judgment sample based on expert opinion.

Findings

While the net-benefits of implementing IFRS varied across firms, this study’s unanimous finding was that no firms (in the sample or population) adopted IFRS early, despite stated intentions to the contrary. The key reasons for shunning early IFRS adoption were found to be frequent changes in regulations, insufficient benefits from adopting IFRS and the undermining of comparability across companies, compounded with scarce preparation time. Further, this study found that the Taiwanese accounting regulator’s reluctance toward IFRS adoption, partly caused by a long-standing US influence, contributed to this anomalous outcome.

Practical implications

This study recommends two critical policy changes: more realistic timelines and less frequent regulatory changes.

Originality/value

To the best of the authors’ knowledge, this is the first study to investigate the reasons behind the anomaly of no early adoption of IFRS in Taiwan, using new primary data and illustrative case studies. Its novelty lies in extending understanding beyond the existing quantitative literature on accounting standards, using new “thick” qualitative evidence on motives for such choices and decision-making processes, which have been neglected in previous work.

Keywords

Acknowledgements

The authors would like to thank all participants at the 2016 Annual Conference of Japan Accounting Association (JAA) and at the 2019 Annual Conference of British Accounting and Finance Association (BAFA), for helpful suggestions on this paper. The authors also thank Prof Tadanori Yosano (Kobe University) and Prof Anne Wu (National Chengchi University) for valuable advice on early draft, and insight into the Taiwanese context. Prof Chen-En Ko and Prof Chi-Chun Liu (both at the National Taiwan University) were most helpful in enabling access to the field and facilitating networking with other scholars. The authors also acknowledge intellectual inspiration and facilitation by Dr Julia Smith and Prof Krishna Paudyal (University of Strathclyde). The authors would also like to thank Prof Tse-Shih Wang, Prof Hua-Wei Huang, Prof Yu-Hong Liu (National Cheng Kung University) and Mr Chien-Chih Wu (PwC, Taiwan) for facilitating funding and advising on Taiwanese accounting practice. Finally, we thank all interviewees in the field: without their consent this research would not have been possible.

Funding sources: The authors gratefully acknowledge the funding support of the Taiwan Accounting Association and the National Cheng Kung University (via the Department of Accountancy and the Headquarters of University Advancement sponsored by the Ministry of Education in Taiwan) that allowed Yu-Lin Hsu to attend the 2016 JAA annual conference. By the same agency, the National Cheng Kung University enabled Gavin C. Reid to travel to Taiwan for concluding research on this paper. Finally, we thank the Department of Accounting and Finance and the PGR Student Travel Grant, of the University of Strathclyde, for financial support of the field trip to Taiwan by Yu-Lin Hsu and the 2019 BAFA conference attendance.

Citation

Hsu, Y.-L. and Reid, G.C. (2023), "Explaining IFRS reluctance with case study vignettes", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-06-2022-0236

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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