Two reasons for mandatory adoption

of IFRS:
1. IFRS requires more disclosure which impacts
on the reduction of capital costs.
2. A set of uniform accounting standards will
improve the comparability of financial
reporting and impact on the reduction of
capital costs.
 Quality Accounting Standards
1. Content Quality
2. Process Quality
Content Quality
1. Standards should be easy to implement and
explain compared to standards that only present
items that can and can not be done.
2. Standards should provide the necessary
recognition and measurement guidelines
regarding the transactions or economic events
that occur.
3. Disclosures should be limited which contribute
significantly to the understanding of the users of
the financial statements on the financial
performance of the company.
Process Quality
1. New Standard Development should be limited only to areas or
scope where there is no set standard.
2. The development of new standards should include the
thoroughness and frequent participation of standard board
members. New standards must be tested before finalization.
3. The development of new accounting standards should include
consideration of accounting standards from other countries for
the creation of international harmonization.
4. Standards are generated in response to new issues or events
related to the responses of accounting practice problems.
5. Standards should provide a brief overview of all or any of the
guidelines in the future.
6. The process of creating a new standard should have a realistic
purpose for the user's needs and should be completed on time.
 Absence VS Divergence
• Absence measures the differences between
Domestic Accounting Standards (DAS) and
International Accounting Standards (IAS) as the
extent to which the rules regarding certain
accounting issues are missing in DAS while
covered in IAS.
• Divergence measures the differences between
DAS and IAS as the extent to which the rules
regarding the same accounting issue differ in DAS
and IAS
Factors Potentially Associated with
Absence
1. Legal Origin (Common Law VS Code Law).
2. Ownership Concentration (Highly Diffused VS
Highly Concentrate)
3. Economic Development (Developing
Countries VS Developed Countries)
4. Importance of The Accounting Profession
(Weak VS Strong Accounting Profession)
5. Importance of Equity Market (High VS Low
developed equity market)
Factors Potentially Associated with
Divergence
1. Legal Origin (Common Law VS Code Law).
2. Ownership Concentration (Highly Diffused VS
Highly Concentrate)
3. Economic Development (Developing
Countries VS Developed Countries)
4. Importance of The Accounting Profession
(Weak VS Strong Accounting Profession)
5. Importance of Equity Market (High VS Low
developed equity market)
Determining Factors of Adoption of
International Accounting Standards
1. Bonding Theory
2. Anti-director rights Hypothesis