The Cost of Implementing New Accounting Standards: The Case of IFRS Adoption in Australia

Posted: 5 Nov 2016

See all articles by Anna Loyeung

Anna Loyeung

University of Technology, Sydney - School of Accounting; Financial Research Network (FIRN)

Zoltan Matolcsy

University of Technology, Sydney; Financial Research Network (FIRN)

Joseph Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Peter Alfred Wells

University of Technology Sydney, Accounting Discipline Group ; Financial Research Network (FIRN)

Date Written: November 1, 2016

Abstract

This article examines the implementation errors that are made when accounting standards are implemented for the first time. Focusing on the transition to the International Financial Reporting Standards (IFRS), we provide evidence on the causes of these errors as well as the economic consequences of disclosing these errors. We find that the quality of both the chief financial officers (CFOs) and the auditors are associated with less implementation errors. We also find that there is a learning process as later adopters of IFRS report less errors compared to early adopters in the financial reporting cycle. In terms of the consequences of disclosing these errors, we find that firms reporting more implementation errors experience an increase in information asymmetry when these errors become known to market participants. Furthermore, we find a positive association between implementation errors and increases in audit fees when the implementation errors are disclosed. Our results are robust with respect to a number of sensitivity tests.

Keywords: Accounting standards, audit fees, IFRS, implementation errors, information asymmetry, learning

Suggested Citation

Loyeung, Anna and Matolcsy, Zoltan and Weber, Joseph Peter and Wells, Peter Alfred, The Cost of Implementing New Accounting Standards: The Case of IFRS Adoption in Australia (November 1, 2016). Australian Journal of Management, Vol. 41, No. 4, 2016, Available at SSRN: https://ssrn.com/abstract=2864511

Anna Loyeung (Contact Author)

University of Technology, Sydney - School of Accounting ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Zoltan Matolcsy

University of Technology, Sydney ( email )

School of Accounting PO Box 123
Sydney 2007, New South Wales
Australia
+61 2 9514-3564 (Phone)
+61 2 9514-3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Joseph Peter Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States
617-253-4310 (Phone)

Peter Alfred Wells

University of Technology Sydney, Accounting Discipline Group ( email )

P.O. Box 123
Broadway NSW 2007
Australia
+61 (02) 9514 3628 / 3629 (Phone)
+61 (02) 9514 5515 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,111
PlumX Metrics