Quality of the Financial Reporting within the IFRS: Research on Determining the Attitudes and Evaluations of Financial Information Users

Abstract

The transition to International Financial Reporting Standards (IFRS) in Turkey can lead to important effects on the financial reports of businesses, and the process of analyzing these reports. A change in the offices of financial reports required of businesses is due to the transition to IFRS. This study examines whether IFRS affects the process of financial reporting. The study measures the effects and perceptions of IFRS the process of financial reporting on businesses operating on the Istanbul Stock Exchange (ISE). This article adds to the literature by estimating the attitudes and evaluations of financial managers, analysis and investor with respect to the effect of IFRS harmonization on financial performance of listed firms in Turkey and providing analyses on the quality of financial reporting. A questionnaire survey was used, and data were analyzed via multi-regression analysis.

Keywords

• Uluslararası Finansal Raporlama Standartları, Finansal Analiz, Kalite, İstanbul Menkul Kıymetler Borsası.

Quality of the Financial Reporting within the IFRS: Research on Determining the Attitudes and Evaluations of Financial Information Users

Abstract

Türkiye’de Uluslararası Finansal Raporlama Standartları (IFRS) uygulamalarına geçiş, işletmelerin finansal tablolarında ve bu tabloların finansal raporlama sürecinin analizinde önemli etkilere yol açabilir. IFRS’lere geçiş ile birlikte işletmelerin finansal tablo kalemlerinde değişim meydana getirmektedir. Bu çalışma, IFRS’nın finansal raporlama sürecine yönelik etkileme süreci olup olmadığının belirlenmesi amaçlanmıştır. Bu çalışmada, IFRS kapsamında finansal raporlama sürecinin İstanbul Menkul Kıymetler Borsası’nda faaliyet gösteren işletmeler üzerindeki etkilerini ve algılamalarını ölçmek amaçlanmıştır. Bu çalışma, finansal raporlamanın kalitesine analiz sağlaması ve Türkiye’de borsaya kayıtlı firmalarda finansal performansın IFRS uyumuna etkisinin belirlenmesinde finans yöneticilerinin, analistlerin ve yatırımcıların tutum ve değerlendirmelerinin benimsenmesi açısından literatüre katkı sağlanması beklenmektedir . Çalışmada anket yöntemi kullanılmış olup, ankete ilişkin sorular çoklu regresyon analizine tabi tutulmuştur.

Keywords

• International Accounting and Financial Reporting Standards, Financial Analysis, Quality, Istanbul Stock Exchange.

References

1. Ahmed, K., Chalmers, K. and Khlif, H. (2013), A Meta-analysis of IFRS Adoption Effects, The International Journal of Accounting, 48, 173-217.
2. Akgün, A.İ. (2013), The Impact of International Financial Reporting Standards on Financial Analysis: A Study On IMKB (Istanbul Stock Exchange), Journal of Doğuş University, Vol.: 14, Issue: 1, January 2013, 10-26.
3. Aljifri, K. (2012), The Quality of IFRS Financial Reporting, Accounting and Marketing, Volume:1, Issue: 2, 2012, 1-2.
4. Armstrong, C.S., Barth, M.E., Jagolizer, A.D. and Riedl, E.J. (2010), Market reaction to the adoption of IFRS in Europe, The Accounting Review, 85 (1), 31–62.
5. Atwood, T.J. , Drake, M.S., Myers, J.N. & Myers, L.A. (2011), Do Earnings Reported Under IFRS Tell Us More About Future Earnings and Cash Flows?, Journal of Accounting and Public Policy, 30 (2), March-April, 103-121.
6. Barth, M.E., Landsman, W.R. & Lang, M.H. (2008), International Accounting Standards and Accounting Quality, Journal of Accounting Research, 46(3), 467-498.
7. Blanchette, Michel, Racicot, F-E. & Girard, J-Y. (2011), The Effect of IFRS on Financial Ratios: Early Evidence in Canada, Canada: Certified General Accountants Association.
8. Bushman, R., Piotroski, J. (2006), Financial reporting incentives for conservative accounting: the influence of legal and political institutions, Journal of Accounting and Economics, 42, 107-148.

9. Byard, D., Li, Y., Yu, Y. (2011), The effect of mandatory IFRS adoption on financial analysts’ information environment, Journal of Accounting Research, 49, 69-96.
10. Callao, S., Jarne, J.I. & Laînez, J.A. (2007), Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting, Journal of International Accounting, Auditing and Taxation, 16, 148-178.
11. CHEN, F., O-K. Hope, Q. Li, and X. Wang. (2011), Financial Reporting Quality and Investment Efficiency of Private Firms in Emerging Markets, The Accounting Review, 86 (4), 1255-1288.
12. Cheong, C. S., & Al Masum, M. (2010), Financial analysts' forecast accuracy: Before and after the introduction of AIFRS, Australasian Accounting Business & Finance Journal, 4(3), 65-81.
13. Cheong, C.S., Kim, S. & Zurbruegg, R. (2010), The impact of IFRS on financial analysts’ forecast accuracy in the Asia-Pacific region: The case of Australia, Hong Kong and New Zealand, Pacific Accounting Review, 22(2), 124-146.
14. Choi, T.H.& Pae, J. (2011), Business Ethics and Financial Reporting Quality: Evidence from Korea, Journal of Business Ethics, 103,403–427.
15. Christensen, HB, Lee, E and Walker, M. (2007), Cross-sectional variation in the economic consequences of international accounting harmonization: The case of mandatory IFRS adoption in the UK, The International Journal of Accounting, 42, 341-379.
16. Cortesi, A., Montani, E. & Tettamanzi, P. (2009), IAS/IFRS Adoption by Italian Listed Companies: First Empirical Evidences, International Review of Business Research Papers, Vol. 5, No. 4, 388-398.
17. Covrig, V., DeFond, M., Hung, M. (2007), Home bias, foreign mutual fund holdings, and the voluntary adoption of International Accounting Standards, Journal of Accounting Research, 45, 41-70.
18. Cuijpers, R, & Buijink, W. (2005), Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequences, European Accounting Review, 14(3), 487-524.
19. Daske, H. (2006), Economic benefits of adopting IFRS or US-GAAP: Have the expected cost of equity capital really decreased?, Journal of Business Finance & Accounting, 33(3&4), 329-373.
20. Daske, H., Hail, L., Leuz, C., Verdi, R. (2008), Mandatory IFRS reporting around the world: early evidence on the economic consequences, Journal of Accounting Research, 46, 1085-1142.
21. Dechow, P., Ge, W. & Schrand, C. (2010), Understanding earnings quality: A review of the proxies, their determinants and their consequences, Journal of Accounting and Economics, 50 (2-3), 344-401.
22. DeFond, M., X. Hu, M. Hung, and S. Li. (2011), The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability, Journal of Accounting and Economics, 51 (3), 240-258.
23. Ding, Y.&Su, X. (2008), Implementation of IFRS in a regulated market, Journal Account.Public Policy, 27, 474-479.
24. Ernstberger, J., Krotter, S. & Stadler, C. (2008), Analysts’ Forecast Accuracy in Germany: The Effect of Different Accounting Principles and Changes of Accounting Principles, Business Research Official Open Access Journal of VHB, Vol. 1(1), 26-53.
25. Gebhardt, G. & Novotny-Farkas, Z. (2011), Mandatory IFRS Adoption and Accounting Quality of European Banks, Journal of Business Finance & Accounting, 38(3) & (4), 289-333.
26. Givoly, D., C. Hayn, and S.P. Katz (2010), Does public ownership of equity improve earnings quality? , The Accounting Review, 85 (1), 195-225.
27. Goodwin, J., Ahmed K. & Heaney, R. (2008), The Effects of International Financial Reporting Standards on the Accounts and Accounting Quality of Australian Firms: A Retrospective Study, Journal of Contemporary Accounting & Economics, 4(2), 89-119.
28. Hail, L., Leuz, C., Wysocki, P. (2010), Global accounting convergence and the potential adoption of IFRS by the U.S. (part I): conceptual underpinnings and economic analysis, Accounting Horizons, 24, 355-394.
29. Hamberg, M., Taylan Mavruk, T. and Sjögren, S. (2013), Investment allocation decisions, home bias and the mandatory IFRS adoption, Journal of International Money and Finance, 36,107-130.
30. Horton, J., Serafeim, G. & Serafeim, I. (2013), Does Mandatory IFRS Adoption Improve the Information Environment?, Contemporary Accounting Research, 30(1), 388-423.
31. Hung, M., & Subramanyam, K. R. (2007), Financial statement effects of adopting International Accounting Standards: The case of Germany, Review of Accounting Studies, 12(4), 623-657.
32. Iatridis, G. (2010a), IFRS Adoption and Financial Statement Effect: The UK Case, International Research Journal of Finance and Economics, 38, 165-172.
33. Iatridis, G. (2010b), International Financial Reporting Standards and Financial Statement Information, International Review of Financial Analysis, 19, 193-204.
34. Jiao, T., Koning, M., Mertens G. & Roosenboom P. (2012), Mandatory IFRS adoption and its impact on analysts' forecasts, International Review of Financial Analysis, 21, 56–63.
35. Jones, S. & Higgins, A.D. (2006), Australia’s switch to international financial reporting standards: a perspective from account preparers, Accounting and Finance, Vol. 46, 629-652.
36. Jones, S., & Finley, A. (2011), Have IFRS made a difference to intra-country financial reporting diversity?, The British Accounting Review, 43(1), 22-38.
37. Landsman, W.R., Lang, M., Barth M.E. & Williams C. (2012), Are IFRS-based and US GAAP-based accounting amounts comparable?, Journal of Accounting and Economics, 54, 68-93.
38. Landsman, W.R., Maydew, E.L. & Thornock, J.R. (2012), The information content of annual earnings announcements and mandatory adoption of IFRS, Journal of Accounting and Economics, 53, 34–54.
39. Lantto, A.M. & Salstrom, P. (2009), Impact of International Financial Reporting Standard Adoption on Key Financial Ratios, Account and Finance, Vol. 49, 341-361.
40. Li, S. (2010), Does mandatory adoption of International Financial Reporting Standards in the European Union reduce the cost of equity capital?, The Accounting Review, 85, 607- 636.
41. Macias, M. & Muino, F. (2011), Examining Dual Accounting Systems in Europe, The International Journal of Accounting, 46, 51-78.
42. Navarro-Garcîa J.C. & Bastida F. (2010), An empirical insight on Spanish listed companies’ perceptions of International Financial Reporting Standards, Journal of International Accounting, Auditing and Taxation, 19, 110-120.
43. Petreski, M. (2006), The Impact of International Accounting Standards on Firms, Financial Accounting and Reporting Section Meeting Paper, 2006, 1-12.
44. Quta, E.R. (2011), The Impact of International Financial Reporting Standards (IFRS) Adoption on the Accounting Quality of Listed Companies in Kenya, International Journal of Accounting and Financial Reporting, Vol. 1, No.1, 212-241.
45. Richardson, S. & Tuna, İ. (2009), International Financial Statement Analysis (Chapter 17: Evaluating Financial Reporting Quality), New Jersey: John Wiley & Sons, Inc.
46. Simga-Mugan C and Hosal-Akman N., (2005), Convergence to international financial reporting standards: The case of Turkey, International Journal of Accounting, Auditing and Performance Evaluation, Vol. 2, No. 1/2: 127-139.
47. Simga-Mugan C and Hosal-Akman N., (2012), Principles of Financial Accounting: Based on IFRS, London: MacGraw-Hill, Inc.
48. Stecher, J and Suijs, J. (2012), Hail, Procrustes! Harmonized accounting standards as a procrustean bed, Journal of Accounting and Public Policy, 31, 341-355.
49. Stoian, F., Morariu, A., Mitea, N. & Crecana, C. (2009), Financial Statement Understandability Based An Explanatory Notes, Annales Universitatis Apulensis Series Oeconomica, 11(1), 345-356.
50. Van Tendeloo, B. & Vanstraelen, A. (2005), Earning Management under German GAAP versus IFRS, Europen Accounting Review, 4 (1), 155-180.
51. Young, D., Guenther, D.A. (2002), Financial reporting environments and international capital mobility, Journal of Accounting Research, 41, 553-579.