The Impact of Implementing International Financial Reporting Standards on the Statement of Financial Position in Iran

Document Type : Research Paper

Authors

1 Ph.D. Candidate of Accounting, Khorramshahr International Branch, Islamic Azad University, Khorramshahr, Iran.

2 Professor of Accounting, Al-Zahra University, Tehran, Iran.

3 Assistant Professor of Accounting, Abadan Branch, Islamic Azad University, Abadan, Iran.

10.22103/jak.2022.19299.3694

Abstract

Objective: IFRS have been widely accepted and implemented worldwide since 2005. In Iran, the use of international financial reporting standards is allowed for the fiscal year starting from 3/21/2013 and is mandatory for a group of companies from 3/20/2016. However, the number of companies that have complied with this requirement is very small. One reason for this is the significant impact of the implementation of these standards on the items of the statement of financial position, but no scientific evidence has been provided for this issue. The purpose of this study is to investigate the effect of international financial reporting standards implementation on the statement of financial position of Iranian manufacturing companies.
Method: This study used a descriptive-causal and Ex-Post Facto design. Statistical population includes manufacturing companies that have prepared financial statements according to IFRS. According to study, only one steel company has published its financial statements in compliance with the requirements of the Stock Exchange and Securities Organization in codal, by contacting the auditing companies providing IFRS services, it was found that these companies have prepared financial statements based on IFRS for 5 other companies, but these publishers have not published these financial statements publicly, and therefore by signing a confidentiality agreement with auditing companies, this information in researchers were allowed to use it without mentioning the name of  the company in the research. Therefore, the sample includes 6 companies, all of which are in the steel industry and have more than 50% market share in this industry. Due to the non-normality of the data, the non-parametric Wilcoxon Signed-Ranks test was used to test the hypotheses.
Results: Findings show that after IFRS implementation, the average total non-current assets increased from 61,805,379 to 120,820,274(95%) and the total assets from 109,552,190 to 167,042,984 (52%). Also, the average price of property, plant and equipment from 50,522,345 to 105,977,233 about 100 percent, investment in property increased from 20,982 to 316,588 and Investments in associates increased from 323,222 to 2,059,848. The average accounts receivable and inventory have decreased after the implementation of IFRS. After the implementation of IFRS, the average reserves increased from 2,011,449 to 2,559,091, equivalent to 27%, and the retained earnings increased from -976,309 to 43,663,393, and the average, maximum and minimum Issued capital did not change. Also, the average equity attributable to equity holders of the parent grew by about 100 percent and the average non-controlling interest growth grew by about 30 percent, The average total non-current liabilities increased from 12.453.065 to 240.03.327 (92%) and the average total liabilities increased from 65.552.333 to 77.272.299 (18%) and the average deferred tax liabilities for each company 11.764. .062 was identified. Also, the average liabilities for retirement benefits and dividends payable did not change much, and an average of 711,057 reserves were identified for each company. Findings show that the implementation of  IFRS has a significant impact on property, plant and equipment, inventory, total current assets, total non-current assets, retained earnings, interest-bearing loans and borrowings, payables,  provisions, deferred tax liabilities, total non-current liabilities and  total liabilities and causes a considerable increase in property, plant and equipment, other intangible assets, total non-current assets, total assets, retained earnings, equity attributable to equity holders of the parent, total equity, deferred tax liabilities,  total non-current liabilities, payable facilities, current liabilities, Total liabilities  and provisions  and considerable decrease in inventory, accounts receivable, total current assets and payables. The current ratio and the ratio of long-term debt to equity are significantly different from the five ratios examined in the financial statements of steel companies according to IFRS to Iran accounting standards, and the amount of four ratios (current ratio, debt-to- equity ratio, debt-to-assets ratio, ratio Market value to book value) have decreased according to IFRS to Iran accounting standards and only the ratio of long-term debt to equity according to IFRS to Iran accounting standards has increased.
Conclusion: Implementing IFRS has led to significant changes in statement of financial position and financial ratios and has reduced the gap between the book value and the market value of the company. The present study, according to the approvals of the Auditing Organization in 2011 and the Stock Exchange and Securities Organization in 2013 and 2016, can be a guide for legislators, Standardizers, managers, accountants and auditors to transition to IFRS. The practical results of this research are that the Stock Exchange and Securities Organization as the main sponsor of micro-investors, the Auditing Organization as the reference for standardization and investors can gain insight into the effect of using IFRS and considering the significant differences, Emphasize and insist on the implementation of approvals for the publication of consolidated financial statements based on IFRS. Capital market publishers can also reduce their worries and resistance by recognizing the effects of change, and by allocating sufficient financial and human resources to implement the stock exchange organization's decree.

Keywords

References

حسینی، احد؛ جبارزاده کنگرلویی، سعید؛ بحری ثالث، جمال و سعدی، رسول. (1400). تحلیل عاملی اکتشافی چالش‌ها و. موانع پیاده سازی استانداردهای بین‌المللی گزارشگری مالی در ایران. بررسی‌های حسابداری و حسابرسی، 28(3)، 552-533.
سبزعلی پور، فرشاد (1391). تأثیر همگرایی استاندارد تلفیق ایران با استاندارد بین‌المللی بر سودمندی اطلاّعات تلفیقی. مجله دانش حسابداری، 3(11)، 201-181.
فخاری، حسین؛ فقیه، محسن و بی زر، ولی اله (1393). مطالعه هزینه- فایده اجرای استانداردهای بین‌المللی گزارشگری مالی (IFRS) بر مبنای تئوری ذینفعان در ایران. بورس، 111، 104-103.
گل‌محمدی، مریم و رحمانی، علی (۱۳۹۷). چالشی‌های فنی به کارگیری ارزش منصفانه در گزارشگری مالی ایران. بررسی‌های حسابداری و حسابرسی، 25(3)، 414-387.
موفق، سمیرا؛ رحمانی، علی؛ نیاکان، لیلا و مداحی، آزاده (1399). اجرای استانداردهای بین‌المللی گزارشگری مالی در صنعت بیمه. پژوهش‌های کاربردی در گزارشگری مالی، 9(17)، 256-227.
مرادی، محمد؛ جعفری دره در، مرتضی و حسین‌زاده، سهراب (1398). چالش‌ها و فرصت‌های اندازه‌گیری ارزش‌های منصفانه در راستای پیاده‌سازی استانداردهای بین‌المللی گزارشگری مالی در ایران. بررسی‌های حسابداری و حسابرسی، 26(3)، 481-456.
نمازی، محمد و اسماعیل پور، حسن (1399). تأثیر استانداردهای بین‌المللی گزارشگری مالی بر فرار مالیاتی و اجتناب مالیاتی. مجلۀ دانش حسابداری، 11(1)، 33-1.
References
Agyei-Boapeah, H., Machokoto, M., Amankwah-Amoah, J., Tunyi, A., & Fosu, S. (2020). IFRS adoption and firm value: African evidence. Accounting Forum, 37, 1-23.
Augustine, O., Tokunbo, A. (2018). Justifying the concept of fair value as a theory through international financial reporting standard. Research Journal of Finance and Accounting, 9(18), 31-45.
Balfoort, F., Baskerville, R.F. (2017). Content and context: “fair” values in China. Accounting, Auditing Accountability Journal, 30(2), 352-377.
Ball R, Kothari S.P, & Robin A. (2000). The effect of international institutional factors on properties of accounting earnings. Journal of Accounting &Economics, 29, 1-52.
Bansal, M. (2022). Economic consequences of IFRS convergence: evidence from phased manner implementation in India. Journal of Asia Business Studies, ahead -of- print.
Black, E.L., Maggina, A. (2016). The impact of IFRS on financial statement data in Greece. Journal of Accounting in Emerging Economies, 6(1), 69-90.
Byers, R. (2017). Implications of transitioning to IFRS on key financial indicators in the oil and gas production industry. Journal of Accounting and Finance, 17(1), 20-37.
Clarkson, P., Douglas, H.J., & Richardson, G.D. (2011). The impact of IFRS adoption on the value relevance of book value and earnings. Journal of Contemporary Accounting & Economics, 7, 1–17.
Cordazzo, M., Rossi, P. (2019). The influence of IFRS mandatory adoption on value relevance of intangible assets in Italy. Journal of Applied Accounting Research, 21(3), 415-436.
De Moura, A.A.F., Altuwaijrib, A., & Guptaca, J. (2020). Did mandatory IFRS adoption affect the cost of capital in Latin American countries? Journal of International Accounting, Auditing and Taxation, 38, 1-18.
De Moura, A.A.F., Gupta, J. (2019). Mandatory adoption of IFRS in Latin America: A boon or a bias. Journal of International Financial Markets, Institutions & Money, 60, 111–133.
Ebaid, I.E.S. (2022). IFRS adoption and accounting-based performance measures: evidence from an emerging capital market. Journal of Money and Business, Vol. ahead-of-print No. ahead-of-print.
Fakhari, H., Faqih, M., & Bizar, V. (2014). Cost-benefit study of implementing international financial reporting standards (IFRS) based on stakeholder theory in Iran. Bourse, 111, 103-104 [In Persian].
Gastón, S.C., García، C.F., Jarne J.I.J., & Gadea, J.A.L. (2010). IFRS adoption in Spain and the United Kingdom. Advances in Accounting in International Accounting, 26, 304–323.
Gastón, S.C., Jarne J.I.J., & Gadea, J.A.L. (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.
George, E.T.D., Li X., & Shivakumar, L. (2016). A review of the IFRS adoption literature. Review of Accounting Studies, 28, 1-30.
Golmohammadi, M., Rahmani, A. (2018). Technical challenges of implementing fair values in financial reporting of Iran: Emphasizing on IFRS13 requirements. Journal of Accounting and Auditing Review, 25(3), 387-414 [In Persian].
Hallberg, A., & Persson, S. (2011). Voluntary application of IFRS: A study of factors and explanations on the Swedish unregulated capital markets.
Herz, R.H. (2013). Accounting Changes. Aicpa, Durham, NC (USA).
Hope, O.K., Jin, J., &  Kang, T. (2006). Empirical evidence on jurisdictions that adopt IFRS. Journal of International Accounting Research, 5, 1-20.
Hosseini, A., Jabbarzade Kangarloye, S., Bahrisals, J., & Sadi, R. (2021). Exploratory factor analysis of the challenges and obstacles of the implementing IFRS in Iran. Accounting and Auditing Review, 28(3), 533-552 [In Persian].
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.
Jermakowicz, E.K., Chen, C.D., & Donker, H. (2018). Financial statement effects of adopting IFR the Canadian experience. International Journal of Accounting & Information Management, 26(4), 466-491.
Kainth, A., Wahlstrøm, R.R. (2021). Do IFRS promote transparency? Evidence from the bankruptcy prediction of privately held Swedish and Norwegian companies. Journal of Risk and Financial Management, 14(123), 1-15.
Karapınar, A., Zaif, F. (2022). Does the IFRS improve earnings quality? A comparison of Turkish GAAP and IFRS. Journal of Islamic Accounting and Business Research, 13(2), 277-296.
Ki, D.H., Leem, W.B., & Yuk, J.H. (2019). The effect of IFRS adoption on the value relevance of accounting information. Investment Management and Financial Innovations, 16(2), 78-88.
Lantto, A., & Sahlstrom, P. (2007). Impact of international financial reporting standard adoption on key financial ratios. Accounting and Finance, 49(2), 341–361.
Lepone, A., BoonWong, J. (2018). The impact of mandatory IFRS reporting on institutional trading costs: Evidence from Australia. Journal of Business Finance & Accounting, 45(7), 797-817.
Liu, C.H., Yao, L.J., Hu, N., & Liu, L. (2011). ‘The impact of IFRS on accounting quality in a regulated market: An empirical study of China. Journal of Accounting, Auditing and Finance, (4), 659-676.
Mensah, E. (2020). The effect of IFRS adoption on financial reporting quality: evidence from listed manufacturing firms in Ghana. Economic Research, 34(1), 2890-2905.
Moradi, M., Jafari Daredar, M., & Hosseinzadeh, S. (2019). Challenges and opportunities for measuring fair value, in international financial reporting standards adoption in Iran. Journal of Accounting and Auditing Review, 26(3), 456-481 [In Persian].
Morales, J. (2017). Fair value in financial instruments accounting: Analysis from a historical perspective. De Computis Spanish Journal of Accounting History, 26, 90-154.
Morales, J.D. & Zamora-Ramírez, C. (2018). The impact of IFRS 16 on key financial ratios: A new methodological approach. Accounting in Europe, 15(1), 105-133.
Movafagh, S., Rahmani, A., Niakan, L., & Madahi, A. (2020). Implementation of international financial reporting standards in the insurance industry. Applied Research in Financial Reporting, 9(2), 227-256 [In Persian].
Namazi, M., & Esmaeilpour, H. (2020). Impact of international financial reporting standards (IFRS) on tax evasion and tax avoidance. Journal of Accounting Knowledge, 11(1), 1-33 [In Persian].
Nwaogwugwu, C.C. (2020). Effects of IFRS adoption on the financial performance and value of listed banks in Nigeria. Journal of Finance and Accounting, 8(4), 172-181.
Opare, S., Houqe, N. & Zijl, T.V. (2020). Meta-analysis of the impact of adoption of IFRS on financial reporting comparability, market liquidity and cost of capital. Working Paper, 120, 1-62.
Oyewo, B. (2020). Post-implementation challenges of fair value measurement (IFRS13): Some empirical evidence. African Journal of Economic and Management Studies, 11(4), 587-607.
Ozturk, C. (2022). Some observations on IFRS 15 and IFRS 16 in the airline industry: The case of air. Studies in Managerial and Financial Accounting, 35, 21–50.
Palea, V. (2014). Are IFRS value-relevant for separate financial statements? Evidence from the Italian stock market. Journal of International Accounting, Auditing and Taxation, 23, 1–17.
Pandya, A., Zijl W.V., & Maroun, W. (2021). Fair value accounting implementation challenges in South Africa. Journal of Accounting in Emerging Economies, 11(2), 216-246.
Piechocka-Kaluzna, A. (2021). Measuring the quality of financial statements after the conversion to ifrs, case of Poland. Journal of Financial Studies & Research, 39, 1-26.
Reese, W.A., & Weisbach, M.S. (2002). Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings. Journal of Financial Economics, 66, 65-104.
Riedl, E.J., Barth, M.E., Jagolinzer A.D., & Armstrong C.S. (2010). Market reaction to the adoption of IFRS in Europe. The Accounting Review, 85, 31-61.
Sabzalipour, F. (2012). The effect of convergence of Iranian integration standard with international standard on the usefulness of integrated information. Journal of Accounting Knowledge, 3 (11), 181-201 [In Persian].
Salah, W., & Abdel-Salam, A. (2019) the Effects of international financial reporting standards on financial reporting quality. Athens Journal of Business & Economics, 5(3), 221-242.
Silva, F.J., DoCouto, G.M., & Cordeiro, R.M. (2009). Measuring the impact of IFRS to financial information of Portuguese companies. Revista Universo Contábil.Blumenau, 5(1), 129–144.
Tsalavoutas, I., André P., & Evans, L. (2012). The transition to IFRS and the value relevance of financial statements in Greece. The British Accounting Review, 44, 262–277.

Files

History

  • Receive Date: 19 April 2022
  • Revise Date: 14 May 2022
  • Accept Date: 01 June 2022

Share

How to cite

Statistics