El martes 6 de marzo de 2018 Ann Jorissen expuso una conferencia en la Fundación Ramón Areces sobre las NIIF como lenguaje contable global y fiable. Un ciclo de conferencias en colaboración con la Cátedra UAM-Auditores Madrid de Información Financiera Corporativa.

1. IFRS Standards as a global single
trusted accounting language: A
realistic proposition or pulling a dead
horse?
Ramon Areces Foundation – Madrid
6 March 2018
Ann Jorissen
Professor of Accounting at the University of Antwerp

2. Support for a single set of global accounting
standards?
• 2012 - G20 Leaders’ declaration “ We support continuing work to
achieve convergence to a single set of high quality accounting
standards”
• 2015 – Financial Stability Forum ‘s declaration “ We reiterate our
support for a single set of high quality global accounting standards”
• 2017 – The World Bank has been a long-term supporter of work to
develop a single set of high-quality global accounting standards

4. The IASB’s Mission Statement ( 2018 – IFRS
foundation Constitution)
• Our mission is to bring transparency, accountability and efficiency to
financial markets around the world by developing IFRS Standards. Our
work serves the public interest by fostering trust, growth and long-
term financial stability in the global economy.
• IFRS Standards contribute to economic efficiency by helping investors
to identify opportunities and risks across the world, thus improving
capital allocation. Use of a single, trusted accounting language
lowers the cost of capital and reduces international reporting costs
for busineses

5. A “single global trusted high quality accounting
language”: a realistic proposition or pulling a dead
horse?
• Elements of the discussion
• A longitudinal focus on the “drivers” of IFRS adoption by countries
• Before 2000 ……
• Between 2000-2009 (first phase): mandatory adoption in the EU and Australia (from
2005)
• After 2009- ….. (second phase): more mandatory adopters (Korea, Brazil, Canada, many
emerging countries)
• Results from accounting studies with respect to mandatory adoption (1sth
phase)
• Results from economics’ studies – How can they be informative to answer the
question
• Some preliminary empirical results
• Obstacles towards “a single global trusted accounting language”

6. Towards a single accounting language in the
nineties
• In the eighties large companies were usually listed on a single stock
market
• In the nineties companies looked for dual listing – this meant the
preparation of the annual accounts in two different types of national
GAAP
• E.g. Daimler Benz published annual accounts in compliance with German
GAAP and US GAAP
• E.g. British Airways used UK GAAP and US GAAP
• In France companies started to use US GAAP (e.g. Total Fina, Suez) or IAS
(Eutelsat, Rémy Countreau, Renault)
• Many Swiss, German and Scandinavian companies used IAS

8. Example of British Airways (source Annual Reports)
British Airways
(million £)
2000 2001 2002 2003 2004
Net income UK
GAAP
-21 114 -142 72 130
Net income US
GAAP
- 451 226 -119 -128 396
Equity UK GAAP 3147 3215 2016 2058 2218
Equity US GAAP 2389 2334 2081 1932 2381

9. Drivers towards a single set of standards
• The EU’s accounting strategy was focused on harmonization (4th, 7th
Directive) – this policy allows differences in the national GAAPs and
hinders comparability ( still the case for private firm financial reporting)
• Large European companies who wanted to make an appeal to the
international capital market, started to use high quality accounting
standards like IFRS (IAS), US GAAP or UK GAAP
• Driver towards a single set of high quality standards came from preparers
and also users (trade unions in Germany and France)
• EU Parliament issued in 2002 the IAS Regulation (1606/2002), requiring all
groups that have shares or bonds traded on a EU stock market to prepare
the annual accounts in compliance with IFRS (IAS) from 2005 (2007 for
bonds) onwards

10. Choice by the EU for International
Accounting Standards instead of US GAAP
• Reform of the IASC into the IFRS Foundation and the IASB in 2002
• The predecessor the International Accounting Standards Committee had been
created in 1973 and was very closely related to IFAC
• The standard setting body (IASB) now consisted of independent full time
members (two part-time members) who developped standards
• The Trustees (IFRS Foundation) are responsible for the oversight of the Board
and the financing of the organization
• IFRS (IAS) become mandatory in the EU only after endorsement by
the EU – so far all standards have been endorsed in full except IAS 39
where two carve outs were foreseen

11. Mission Statement of the IASB (in 2002)
• The objectives of the IASC Foundation are:
• (a) To develop, in the public interest, a single set of high quality,
understandable and enforceable global standards that require high
quality, transparent and comparable information in financial statements
and other financial reporting to help participants in the world’s capital
markets and other users make economic decisions
• (b) To promote the use and rigorous application of those standards
• (c) In fulfilling the objectives associated with (a) and (b), to take account of,
as appropriate, the special needs of small and medium-sized entities and
emerging economies
• (d) To bring about convergence of national accounting standards and IAS
and IFRS to high quality solutions.

12. Enforcement of IFRS?
• Is still a national matter !!!!!!!!
• Local courts judge compliance with the IFRS Standards
• In the EU – compliance with the IFRS Standards as endorsed by the European
Union
• In compliance with the IFRS Standards as issued by the IASB

13. Research evidence with respect to voluntary
adopters
• Voluntary adopters in the EU before 2005 (except for the UK – where it was
forbidden to early adopt), where mostly German and French multinationals
(also Swiss firms)
• Studies focusing on voluntary adopters in other countries
• On average results showed an increase in accounting
quality for the companies that had switched –
voluntary adopters have strong firm-level incentives
to provide high quality information – self-selection
bias

14. Research evidence: First phase of mandatory
adoption of IFRS(IAS) (2005-2009)
• From 2005 onwards listed groups in the EU and the European
Economic Area (Norway, Iceland, Liechtenstein), Australia and New
Zealand
• Results show on average an increase in accounting quality,
comparability, a decrease in cost of capital and an increase in market
liquidity, however it is difficult to link these benefits to the adoption
of high quality standards only. Results reveal that these benefits can
often be attributed to the institutional characteristics of a country or
the adoption of IFRS coincides with changes in the institutional
environment.

15. What are a country’s institutions?
•Institutions include a country’s formal rules,
written laws, formal social conventions, informal
behavioral norms and shared beliefs, as well as
means of enforcement (North, Wallis &
Weingast, 2009)

16. What do we learn from the research on
mandatory IFRS Adoption (2005-2009)?
• High quality standards as such do not lead automatically to high
quality information
• The domestic institutional environment plays an important role – the
enforcement of the standards is still a national matter – recently more
coördination between EU enforcers (national stock market regulators) via
ESMA –
• Changes in the institutional environment (e.g. an increase in corporate
governance regulation in the EU around 2005) make it difficult to isolate the
effect of the mandatory introduction of IFRS

17. Institutional Environment: empirical evidence
• Variables most commonly used to measure cross-country institutional
differences are those originally developped by La Porta et al. (1998)
• Ex- ante investor protection
• Ex-post enforcement quality (judicial quality)
• Legal tradition (common law, code law (French, German, Scandinavian)
• In countries with higher scores on these characteristics – higher
accounting quality of IFRS annual accounts
• Most of the studies estimate the relationships based on data of companies in
Western countries characterized by at arm’s length pricing and formal
contracting

18. What do we learn ? – some academic
references
• Brüggeman et al. (2013) ‘Intended and unintended consequences of mandatory
IFRS adoption’ European Accounting Review, vol 22, p 1 – 37.
• Christensen et al. (2013)’ Mandatory IFRS reporting and changes in enforcement’,
Journal of Accounting and Economics, vol 56, n° 2-3, suppl 1, p 147-177.
• Pope and Mc Leay (2011) ‘The European IFRS experiment: objctives, research
challenges and some early evidence’, Accounting and Business Research, vol 41, p
233-266.
• ICAEW (2015)‘The effects of mandatory adoption in the EU: a review of empirical
research’, London, ICAEW, 149 p
• Tarca, Ann (2012) ‘ The case for global accounting standards; arguments and
evidence’ , SSRN- id2204889 – paper used by the IFRS Foundation

19. Second phase of mandatory IFRS Adoption
(now across the globe): form 2009 onwards
• MOU between IFRS Foundation and IOSCO – increase in the number
of countries where IFRS is mandatory for listed firms e.g Korea,
Canada, Brazil, South Africa, Argentina (still no mandatory adoption in
US, China, India, Indonesia, Japan….)
• MOU between the World Bank and the IFRS Foundation – donor
driven adoption of IFRS in many emerging countries and developping
countries that receive loans from the World Bank – because the
number of listed firms in those countries are small – IFRS is made
mandatory also for non-listed firms
• Non-listed companies in these countries can choose between Full IFRS or IFRS
for SMEs

20. Adoption of Full IFRS across the world

21. Adoption of IFRS for SMEs around the world

22. Driver for donor-driven adoption
of IFRS ?
•Adoption of IFRS in less developped countries
will facilitate contracting, lead to investments
and facilitate growth (Francis et al., 2008)
•Top-down adoption instead of a bottom-up
adoption (see first phase)

23. In mid-2015, the IASB adapted its Mission
Statement.
• Our Mission is to develop International Financial Reporting Standards (IFRS) that bring
transparency, accountability and efficiency to financial markets around the world. Our
work serves the public interest by fostering trust, growth and long-term financial
stability in the global economy
• IFRS brings transparency by enhancing the international comparability and quality of
financial information, enabling investors and other market participants to make informed
economic decisions
• IFRS strengthens accountability by reducing the information gap between the providers
of capital and the people to whom they have entrusted their money. Our standards
provide information that is needed to hold management to account. As a source of
globally comparable information, IFRS is also of vital importance to regulators around the
world
• IFRS contributes to economic efficiency by helping investors to identify opportunities and
risks across the world, thus improving capital allocation. For businesses, the use of a
single trusted accounting language lowers the cost of capital and reduces international
reporting costs.

24. Are IFRS standards leading to high quality and
increased used across the globe?
• Evidence is mainly available for listed companies in well-developped
market economies (EU, Australia, New Zealand, Canada, Korea,..)
• Evidence is scarce for lesser developped market economies and
emerging countries
• In many countries there is a lack of data (very small stock markets and
private financial reports are not made public or the public files are
difficult to access)

25. Institutional Environment: further
observations
• Leuz (2010) ‘Different approaches to corporate reporting regulation:
how jurisdictions differ and why’ Accounting and Business Research.
Vol 40, n 3, p229-256.
• “ the structure of reporting regulation is influenced by the role
corporate reporting plays in the economy, which in turn likely reflects
the informational and contracting needs of key parties in that
economy” – “ countries with stronger reliance on external finance
and arm’s length transactions tend to have stronger reporting
regulation in securities, investor protection and self-dealing laws than
countries with stronger reliance on relationships and insider
governance”

26. Variables used in accounting and finance
papers for the study of institutional clusters
• legal system
• Corporate governance mechanisms
• The existence and enforcement of laws governing investor protection
• Disclosure standards
• GDP
• Foreign Direct Investments
• Financing constraints

27. Institutional Clusters around the world (Leuz,
2010, page 246, securities regulation, investor
protection and enforcement )
Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5
Australia Belgium Austria Argentina Brazil
Canada Finland Chile Colombia Indonesia
Hong Kong Ireland Denmark Ecuador Nigeria
India Italy France Egypt Pakistan
Israel Japan Germany Greece Peru
Malaysia South Korea Norway Jordan Philippines
Signapore Netherlands Portugal Kenya Sri Lanka
United Kingdom New Zealand Spain Mexico Thailand
United States South Africa Sweden Uruguay Turkey
Taiwan Switzerland Venezuela Zimbabwe

28. Evidence available that information based too a
large extent on formal institutional
characteristics is often not representative for
reporting practices
e.g. own evidence Brazil, see Gassen (2017) for Argentina

29. Variables used in economics papers to study
institutional characteristics
• The informal institutional environment: North (1991) informal institutions are the
actual rules that are followed – informal institutions are usually unwritten entities
and they are created and enforced outside the official channels
• Two types of informal institutions exist (e.g. Helmke and Levitsky, 2003, Banerjee
and Duflo, 2014)
• Inclusive informal institutions (also called cohesive institutions): play a
problem solving role by assisting in social interactions, as well as by
coordinating and improving the efficiency or performance of complex formal
institutions: informal institutions reinforce failing formal institutions
• Extractive institutions (non- cohesive institutions): these informal institutions
play a problem creating role, via corruption, clientelism, or clan-based politics
that undermine markets, states and democratic regimes. These informal
institutions undermine formal institutions

30. Other observations in the literature
• Economies can be split up in market-based economies characterized
by at arm’s length pricing and formal contracting versus relationship
based economies where transactions are grounded in trust and
relationships instead of formal contracts.
• In a relationship-based society, economic transactions are not based
on formal written contracts but on long-term informal relations (Jiang
& Peng, 2011). Moreover, outsiders are less trusted in this type of
economy (Young, Peng, Ahlstrom, Braton et al., 2008)

31. Results of economics’ studies
• Many papers have identified the importance of the national
governance structure for growth, investment and new firm entry (for
an overview of these papers, see Estrin and Prevezer, 2011)
• When implementation of new laws is donor-driven, not a lot of
changes in practice occur. (Bunse and Fritz, 2012;Pritchett et al. 2013;
Banjaree and Deflo, 2014)

32. Some references
• Banerjee, A., & Duflo, E. (2014). Under the thumb of History? Political
institutions and the scope for action (working paper). Cambridge, MA:
National Bureau of Economic Research.
• Estrin, S., & Prevezer, M. (2011). The role of informal institutions in
corporate governance: Brazil, Russia, India and China compared. Asia
Pacific Journal of Management. 28(1), 41-67.
• Helmke, G., & Levitsky, S. (2003). Informal institutions and comparative
politics: a research agenda (working paper). Notre Dame, IN: Kellogg
Institute for International Studies.
• Jiang, Y., & Peng, M. W. (2011). Principal-principal conflicts during crisis.
Asia Pacific Journal of Management, 28(4), 15-39.

33. Some references (continued)
• North, D. (1991). Institutions. Journal of Economic Perspectives, 5(1),
97-112.
• North, D., Wallis, J. & Weingast, B. 2009. Violence and social orders:
A conceptual framework for interpreting recorded human history.
Cambridge: Cambridge University Press.
• Nunn, N., & Wantchekon, L. (2011). The slave trade and the origins of
distrust in Africa. American Economic Review, 101(7), 3221-3252.
• Young, M., Peng, M., Ahlstrom, D., Braton, G. & Jiang, Y. 2008.
Corporate governance in emerging economies: A review of the
principal-principal perspective. Journal of Management Studies,
45(1): 196-220.

34. Compliance with IFRS in countries with donor-
driven adoption of IFRS: lessons from economics
studies?
• Factors that could help predict whether IFRS accounts will be regarded as a
“trusted language”.
• Focus on a country’s governance structure and government quality.
• The characteristics of the informal institutional environment ( inclusive versus
extractive informal institutions )
• Whether the country is characterized by a market-based formal contracting economy
or relationship-based economy.
• Hypothesis: A country in (1) which the government is efficient and
effective, (2) where informal institutions are inclusive and (3)where the
economy is leaning more towards formal contracting provides a more
munificent environment for IFRS to become accepted as “a single trusted
language” (evidence with respect to the effectiveness in corporate governance codes in ‘Ngo,
Jorissen & Nonneman (2018) Do OECD type governance principles have economic value for
Vietnamese firms at IPO, Corporate Governance: an international review? 26: 58-79)

35. Variables used in economics papers to study
institutional characteristics
• A State’s Capability to support initiatives and enforce initiatives:
• The capacity to collect taxes (Besley and Persson, 2009)
• Protection of property rights ( Besley and Persson, 2009)
• government effectiveness ( measured by CPIA score of Worldbank)
• The level of democracy (Denizer et al. 2011)
• Bank quality (Denizer et al. 2011)
• Trusthworthiness of the government proxied by
• Corruption (Alesina and Weder, 2002)
• Freedom house civil liberties indicator – political rights and civil rights ( Knack,
2013)

36. Some preliminary empirical tests – choice of
databases and variables
• World Value Survey – Trust (do you trust other people) – number of
missing observations
• Transparency International – CPI 2016 – corruption index
(measurement of corruption in the public sector)
• Freedom House Liberties Indicators (Freedom in the World 2015 –
195 countries and 15 territories)
• Respect of Political Rights
• Respect of Civil Rights
• Total (Political Rights + Civil Rights)

37. Some empirical tests – choice of variabels
(continued)
• World Bank data
• Foreign direct investment (% of GDP)
• Export (% of GDP)
• Account at a financial institution – income poorest 40% (% of ages +15)
• Time to enforce a contract
• Bribery incidence (% of firms experiencing at least one bribe payment
request)
• Informal payments to public officials (% of firms)
• Market capitalization of domestic companies

38. Some preliminary results of multivariate
analyses
World Value
Survey
Dependent
Variable
Independent
Variable – high
significance (*** -
0,001)
Independent
variable
significant ( ** -
0,01)
Independent
Variable
significant ( *,
0,05)
Non-significant
Level of Trust
(high)
Level of
corruption CPI
2016
(low level)
Total of Civil
Rights and
Political Rights
(high respect)
Country risk index

43. Some preliminary results of multivariate
analyses
Transparency Int.,
Freedom House and
Worldbank data
Dependent Variable Independent Variable
– high significance (***
- 0,001)
Independent variable
significant ( ** - 0,01)
Independent
variable significant (
* - 0,05)
Non-significant
Level of corruption CPI
2016
(low)
Civil Rights + Time to
enforce a contract
(high respect and less
time)
Political rights,
strengths of legal
rights
Level of corruption CPI
2016
(low)
% of poorest people
with bank account
(high)
market
capitalization of
domestic firms
(high)
Domestic credit to
private sector, bank
account of rich
people, business
extent disclosure
index

47. Some preliminary results of multi-variate
analyses
Transparency
International, Freedom
House and Worldbank
data
Dependent Variable Independent Variable –
high significance (*** -
0,001)
Independent variable
significant ( ** - 0,01)
Independent variable
significant ( * - 0,05)
Non-significant
Foreign Direct Investment
(higher)
Civil Rights
(higher respect)
Political Rights
(higher respect)
Strength of legal rights,
time to enforce a contract
Exports
(higher)
Civil Rights
( higher respect)
Political Rights
(higher respect)
Strength of legal rights,
time to enforce a contract
Foreign Direct Investment
(higher)
Bribery incidence
(lower)
Informal payment to
officials
(lower)
Level of corruption, losses
to theft, gifts to tax
authorities
Exports
(higher)
Level of corruption,
Informal payments to
officials
(lower and lower)
Bribery incidence, losses
to theft, gifts to tax
authorities

52. Adoption of Full IFRS across the world

53. Adoption of IFRS for SMEs around the world

54. Munificence of the environment to adopt
IFRS as a trusted language
• Yes if adoption is stakeholder driven
• – EU for listed firms
• EU non-listed firms
• If adoption is more donor-driven – lot of challenges
• IFRS and the idea of “trusted language” implicitly assumes markets based on formal
contracting, supported by efficient states and inclusive informal institutions
• IFRS are developped from the perspective of a formal contracting and market based
economy, not all economies in the world have these characteristics
• Results of the first phase of mandatory IFRS adoption are not “predictive”
for the other IFRS adoptions across the globe

55. Conclusion
• Will IFRS become “a single trusted global language”?
• Real proposition versus pulling a dead horse?
• Necessary conditions:
• (1) recognize the importance of a state’s capability to support and enforce
laws and initiatives
• (2) when a country’s informal institutions are of an extractive nature, serious
obstacles towards the acceptance of IFRS into a trusted language
• (3) accounting numbers are useful in a formal contracting economy, in a
relationship based economy, formal accounting numbers are less used in
transactions and business relations

56. Conclusion
• This objective of “ a single trusted global language “ is beyond the
control of the IASB and the IFRS Foundation
• Developping high quality standards and facilitating consistent application will
not be enough
• Implementation and education efforts of the IASB and the IFRS Foundation
will only help if the jurisdiction is characterized by an environment munificent
to accept accounting as “a trusted language”