Chapter 2

Review Of Literature
 Sir David Tweedie, Chairman of International Accounting Standards Board said “ If they
all use the same methods and the accounting for one transaction is the same in Sydney, as
in Seattle, as in Strasburg, and in Sheffield , then they will know where they are, and
there is a demand for that type of certainty.”(FEI 2001).

 Mark T.Bradshaw and Gregory S.Miller(2007) reiterated the same and argued that the
evidences are in favour of a single set of Accounting Standards which will “increase the
comparability of accounting information across the countries that differ economically,
politically ,and culturally”.

 Geoffrey Whittington, (2005)“The principles behind the adoption of International

Accounting Standards by different countries have always been the subject of controversy
in accounting literature” (D.Zeghal, K.Mhedhbi, 2006).India’s decision to converge to
IFRS is perceived by many researchers as premature decision. Although harmonisation of
accounting standards not only enhances the quality of financial reporting, increases the
comparability of financial statements but without considering of “country specific
environment factors” the logic/reasons for such convergence will be forfeited. Talaga and
Ndubizu (1986) insisted “that a country’s accounting principles must be adapted to its
local environmental conditions”. In fact, Perera(1989a) went much ahead and stated that
“the accounting information produced according to developed countries is not relevant to
the decision models of less developed countries”.

 Shastri T. (2006) has studied the Accounting Standards for effects of changes in exchange rate in
India and Australia. This is a comparative study. The researcher point of view Australia is one of
the founding members of the International accounting standard committee where as India is it
first associate member. This article compares one of the accounting standards that has global
significance as prevailing in these two important countries advantages of all enterprises that
follow them are comparable financial statement, true and faire view, capital market system, and
various financial report and information through accounting standard. Scope of the study is
conformity of with provisions of the accounting standards are applicable laws, customs, usage
and the business environment. The procedure has been implemented by the accounting
standards has brought uniformity in the preparation of the financial statements. The researcher
was found various content of accounting standard. Lastly he concludes that a disclosure of
financial statement of both countries are classifying of business and geographical segment as
primary and secondary.
 Ashbaugh Hollis et. al. (2001) they investigated whether the variation in accounting standards
across national boundaries relative to International accounting standards (IAS) and whether the
differences in countries accounting measurement and disclosure standards relative to IAS affect
analyst forecast accuracy of non - us firms annual earning. The researchers have examined
whether adoption of IAS changes the absolute value of analyst forecast errors. They also identify
that a sample of 80 non-us firms, they also find that prior to adopting IAS the extent of
difference in countries disclosure and measurement policies relative to IAS is positively
 associated with analysts’ earnings forecast errors. Empirical design and results are getting
through various statistical techniques. It is conclusion their data shows that analyst earnings
forecast errors decrease when adoption of IAS. And the consequent reduction in the variation in
measurement and disclosure practices. Furthermore this result holds after controlling for the
concurrent growth in news reports.

 Hegarty John (2004) address the challenges to the successful implementation of international
accounting & auditing standards. He has presented a balanced combination of capacity and
institutionalized incentive for the rigorous application of international accounting & auditing
standards incentives is the key to successful implementation of these standards and effective
accounting & auditing regulation is required. Therefore he is define international standards are
not necessarily appropriate to govern all financial reporting obligations, this being especially the
case with International Accounting Standards or International Financial Reporting Standards but
lack of human & financial resources is a significant impediment to the implementation of
international standards. The limitations of the study that extent of reliance that can be placed
on the international audit from networks & their individuals national member firms to
compensate for weaknesses in domestic regulatory regimes. Lastly he has defined the World
Bank stands ready to continue working with country authorities, standards, setters, regulators,
private sector stakeholders & the relevant international organizations.

 Alves Maria et. al. (2011) investigates the current state of financial accounting standardization in
two European Union (EU) members’ states Poland and Portugal. The market globalization
combined with the free borders within EU and the accounting systems diversity has
strengthened the need for a unique accounting system that is internationally accepted and that
the progress of accessing foreign capital markets. It is also studied the European accounting
harmonization an analysis on how this process developed in two such different countries as the
same will be made. Therefore the researchers have studied on descriptive approach on
secondary data in polish and Portuguese i.e. official documents, books, and scientific articles. It
find that a vital significance and contribute of the global economy. It is concluded that both
countries social and culture is differences resultant from very different historic and politic
backgrounds overcome the differences relating their accounting system. On the other hand the
companies have biggest challenges for implementation of IFRS.

 Akanni (1988) depreciation is charged on the fixed assets or those assets which are of
material value having long life and are held to be used in business and are not primarily
for resale or for conversion into cash. Usually, with the exception of land, fixed assets
have a limited number of the years of useful life. Motor vans, machines, buildings and
fixtures, for instance do not last for ever. Even land itself may have all or part of its
usefulness exhausted after few years. Some types of lands used for quarries, mines or
land of another sort of washing nature would be examples. When a fixed asset bought is
put out of use by the firm, that part of the cost that is not recovered on disposal is called
depreciation.

 (Robert W. McGee, 2004), “fixed assets have a useful life of more than one year, the
estimated useful life of those assets should be estimated at the time of acquisition. At the
time of acquisition of money to obtain assets is the cost of assets that provide usefulness
over the useful life of the fixed assets. Consequently, because the cost of fixed assets is
 for all benefits, while every year there is always measurement and reporting on the
performance of the company that includes income and expenses, the cost of the fixed
assets should also be allocated as an expense which later this burden will be compared
with the income earned in the current year.”

 (Parmanand Barodiya, 2015) Concluded in their article that International financial

Reporting Standard focuses on quality, reliability & relevancy aspects of the information
to all its users all over the globe while setting a new standard. Harmonization of
Accounting Standard is a need to create & develop global economy. Harmonisation wills
result into true & fair presentation of financial statement that can be easily accessible to
all the potential users including potential investors. IFRS provided detailed guideline for
presentation of financial statement & it gives more insights about the financial
information of the entity so that investor can compare it with other entity to find out best
investment option. For MNC s adoption of IFRS will result into reduction in the cost of
preparation of financial statement & also overcome the difficulty of consolidation of
financial statements working in different country.

 Perry James (2006) focused on the political economy of International Accounting Standards. In
this article examined that IASB’s introduction of fair value accounting reflects and reinforces
changed relations of production. In which the financial sector increasingly dominates the
productive sector, nationally institutionalized economic systems are undermined, and new
forms of economic appropriation are validated. Therefore private body the IASB has been able
to rapidly introduce the fair value paradigm with little public debate outside specialized financial
articles. Then the article argues that accounting standards are inherently political. Accounting
numbers provide some of the key economic anchors around which social relations are
structured. He has also studied transactional private authority and th Accounting Standard
setting from society. It is concluded that accounting standards cannot be reduced to questions
of efficiency since they set out to quantify and compare things which by their very nature, are
neither quantifiable nor directly comparable. Because of this accounting standards are political,
play a central role in shaping the feature path of our market oriented societies disembodying of
Institutionalized Economies and the Isolation.

 Ukidave Deepak (2007) pointed out that financial reporting and corporate disclosure
practices. The prime focus of financial reporting is information about earning and its
components which is of potential value to the investors in conducting security analysis.
Security price has been conducted on the relationship between accounting numbers and
security prices. The financial reporting environment consists of various groups or
constituencies who are affected by and have a stack in the mandatory financial reporting
requirement. Secondly he focused on corporate governance is a system of check and
balances and one of the essential prerequisites of corporate governance is financial
reporting. The corporate boards to exhibit total transparency not only in the books of
accounts but also in overall operation of the company. The current trends in financial
reporting requirements assume that the user has greater sophisticated expertise the data
that has been reported for forty companies. The data would be collected only secondary
sources. He observed that the study showing wrong path to the investors. The Pharma
companies facing major problem in market share. And many companies have tendency to
 blow their trumpets there by creating a rosy picture in the mind of the investors. Lastly he
discuss on some issues are desirability of financial reporting regulation is still an open
question. The rapid data of information technology would have major effect on the form
and structure of financial reporting.

 Mohamad Abdel-Azim (2007) has focused on the accounting measurement and disclosure
choices and implications in the two countries. It also investigated similarity in accounting
practices in different countries. It is significance that limited research in international domain
about accounting in Arab countries in spite of the increased contribution of these countries in
the world economy and the increased open policies towards regarding international trade and
markets. And these trade and markets are existence of many areas which need more
examinations. The hypothesis is that bigger companies in Egypt and the USA could have similar
or differ accounting measures and disclosure than smaller countries. The researcher has
selected 60 of the largest companies listed in Egypt and 60 in USA for the year 2004. Included in
actual annual reports it is concluded that data defines industry could have a significant
difference on choosing accounting policies. There is a need to introduce other variables in this
debate such as the influence of the economic ties on accounting choices. There is a need for
investigating whether globalization has promoted harmonization among different countries
around the world.

 Lowry Michelle (2009) has focused its attention the shareholders litigation and changes in
disclosure behaviour. It has been studied on the way in which disclosure affects litigation risk is
an important question. He also find that managers of sued firms significantly decrease both the
quantity and quality of disclosure following the filling of a class action suit. It has been quite
careful in their empirical analysis and results are robust to a variety of alternative specifications.
The researcher has selected sample of sued firms. This finding tells us nothing about the effects
of disclosure on litigation risk among the set of firms that were not sued. He also suggests that
managers consider bad news disclosures very differently from good news disclosures as well as
the statement that they limit disclosure to avoid lawsuits. Lastly he concludes that disclosure
decreased their litigation costs. Results on the sample of sued firms cannot be generalized to the
broader population of firms. Thus he are still left with the same question: What is the nature of
the relation between disclosure and litigation risk?

 Sarkar Pinta (2011) revealed that the corporate disclosure is a process through which a
corporate entity communicates business and financial information to their stakeholders.
Corporate disclosure is of paramount importance for the efficient and effective allocation of
resources as well as integrity of financial markets. He has selected 10 companies from sansex
stock market. He has been scanned with respect to 22 items of mandatory disclosures. The
limitation of the study is size of the sample is too small to generalize the findings. Therefore the
study has unveiled the quantitative aspect of disclosures in annual reports without looking into
the quality of disclosure. It is found that all the companies selected for analysis have disclosed
mandatory information. There exists a wide diversity in the type and presentation of voluntary
disclosure. Finally there have been marked improvements in the quantity and quality of
information provided in the financial statements. Therefore a view to reducing the diversity and
ambiguity in their disclosure hence is enhancing the quality, reliability, comparability and
comprehensibility of accounting information.
 Karim Waresul et. al. (2005) have examined empirically the level of disclosure of
financial information upon adoption of International Accounting Standards (IAS) in
Bangladesh and the association between a number of corporate attributes and levels of
disclosure in corporate annual reports in Bangladesh. A total of 188 companies, listed on
the Dhaka and Chittagong stock exchanges were included in the study. It is identified
from the individual annual reports and other secondary sources including the stock
exchange Bulletin of the Dhaka Stock Exchange. It is using each of the explanatory
variables and the operationalisation scheme of each variable is outlined. It is hypothesis
that there is no significant association between a number of corporate attributes and the
extent of disclosure. The multiple linear regression technique is used to test the
hypothesis. In fact that financial services sector companies also demonstrated negative
association with disclosure levels might have been caused by the poorer levels of
disclosure by the insurance companies and some banks in the said sector.

 Dr H.1. Verma, Dr M.C.Garg and Dr K.P.Singh (1997)1, stated in their study entitled "Disclosure
of Accounting Standards Vis-a- vis Company characteristics: A study of Indian Corporate Sector"
that, the quality of disclosure of information in the annual reports is not an independent factor.
According to the authors it may be due to account of different philosophy and discretion of
managements in disclosing information to different users. Their study is related to the analysis
of association between company characteristics (size measured by assets and sales. Profit and
age of company) and the extent of the disclosure measured with reference to Accounting
Standard 1 to 10. They covered a sample of 100 top companies drawn from the public and
private sectors over a period of six years from 1988-89 to 1993-94. The authors have proved
that the size of company (in terms of either net tangible assets or net sales) has no effect on the
disclosure scales calculated in terms of accounting standards in the corporate sectors in India.
To examine statistically the possible relationship between profit, age and disclosure scores, the
analysis were made and drawn the conclusion that age, profit and disclosures scores are not
significant related variables. It means that the age and profit of a company does not matter to
the disclosure of accounting standards. The authors has also mentioned an important factor that
the companies in Public Sector s are more concern to the disclosure of accounting standards as
compared to the private sector companies.

 Dr. Ashok K. Mohanty and Prof. Promod K. Sahu (1997i , stated in their study titled,
"Improvement in Accounting Standards in India under the globalisation of Indian economy" that
accounting standards of Accounting Standard Board are in the direction of recent developments
some of them are not free from criticism due to certain weakness as they are flexible and there
is no legislative force to ensure their compliances.

 Mrs. Manju Gupta, Dr. Praveen Saxena and Dr. S.P Kaushik (2002)5 in their article
titled, "A study of Accounting Standards vs. Accounting Practices in Indian Public
Sector" have evaluated thec.ompliances of the Indian Accounting Standards (AS), issued
by the Institute of Chartered Accountant of India(ICAI),among the Public Sector
enterprises of India. According to the author, an attempt has been made to measure and
evaluate as to what extent the Public Sector companies are following the provisions of
Indian Accounting Standards issued by the ICAI while preparing their financial
statements. To achieve this objectives 36 manufacturing public units have been analysed.
 The analysis is based on the revised standards and the study testifies the compliances of
these standards in some selected area of accounting, which is presented as follows

• The standard states that an enterprise should disclose all the adopted accounting policies
and practices, if there is a change in any of the policy which is required by the statute or
which is used for the best presentation of the fmancial statement, the change should be
disclosed with the effect of this change, if any in the financial statement. The enterprise
should also disclose the changed accounting treatment. The increasing trend in changing
of accounting policies to find out the significance of this change By and large there is no
significant change in disclosure of accounting policies in Public Sector Units
.• According to the recent revisions, inventory should be valued at the lower of cost or net
realizable value but old standards provides different methods for different component of
inventory. The present change in adopting the inventory valuation method in Public
Sector Service units is significant. This change occurs because the standard had been
mandatory in 1999-00 and earlier it was recommended for the companies listed on stock
exchange and old standard requires various methods for different component inventory, it
was not very convenient for the users therefore they try to integrate both the standards.
Change in the presentation of the cash flow statements by using direct method in Public
Sector is not preferred. Therefore, it is suggested that effort should be made to pursue the
companies for using direct method in presentation of cash flow statement as it is much
informative and comprehensive for the users of the financial statements as it provide the
transparent picture of the enterprise.

 Hassan Omuima et. al. (2003) examined the value of voluntary and mandatory disclosure in a
market that applies international accounting standards (IAS) with limited penalties for non-
compliances. The lack of enforcement creates on element of choice in the level of mandatory
disclosure by companies. The hypothesis is that the level of voluntary disclosure is expected to
be positively (negatively) associated with firm value when the net benefits of disclosure are
positively (negatively). Second the level of mandatory disclosure is expected to be positively
(negatively) associated with firm value when the net benefits of disclosure are positive
(negative). They examined the relationship between firm value and disclosure. They have
selected the sample consists of 80, non-financial, listed companies from 3 different industrial
sectors over the period 1995 to 2002. They analyzed by using the data univariate & multivariate
analysis method. It concludes that the then voluntary disclosure has a positive, but insignificant
association with the firm value. The panel data analysis empirically the association between
mandatory as well as voluntary disclosure and firm value for Egyptian listed company.

 IASB, (2010) mentioned in the Conceptual Framework that The objective of general purpose
financial reporting forms the foundation of the Conceptual Framework. Other aspects of the
Conceptual Framework—a reporting entity concept, the qualitative characteristics of, and the
constraint on, useful financial information, elements of financial statements, recognition,
measurement, presentation and disclosure—flow logically from the objective.

 Adukia, (2013) gave in his article that Converged IFRS or Indian Accounting Standards (Ind AS)
are the near final Indian Accounting Standards issued by Institute of Chartered Accountants of
India and notified by the Government of India. While the draft of 36 standards issued by ICAI,
 are converged with IFRS, only 35 standards have been notified. The date of implementation of
the Ind AS will be notified by the Ministry of Corporate Affairs at a later date. Ind AS standards
are still not notified under Companies Accounting Standard Rules, 2006 therefore the hitherto
accounting standards are still applicable. These standards do not resemble IFRS. Both by
presentation and measurement principles they are new set of accounting standards developed
in the line of IFRS.

 Perry James (2006) focused on the political economy of International Accounting Standards. In
this article examined that IASB’s introduction of fair value accounting reflects and reinforces
changed relations of production. In which the financial sector increasingly dominates the
productive sector, nationally institutionalized economic systems are undermined, and new
forms of economic appropriation are validated. Therefore private body the IASB has been able
to rapidly introduce the fair value paradigm with little public debate outside specialized financial
articles. Then the article argues that accounting standards are inherently political. Accounting
numbers provide some of the key economic anchors around which social relations are
structured. He has also studied transactional private authority and the disembodying of
Institutionalized Economies and the Isolation of Accounting Standard setting from society. It is
concluded that accounting standards cannot be reduced to questions of efficiency since they set
out to quantify and compare things which by their very nature, are neither quantifiable nor
directly comparable. Because of this accounting standards are political, play a central role in
shaping the feature path of our market oriented societies.

 Tang Vicki (2007) investigates the Chinese companies that issue two classes of shares class A
shares to domestic investors and class B shares to foreign investors. He find that the greater the
difference in the disclosures, the greater the price differential between the A & B shares and
that this difference is directly related to the difference in the EPS numbers reported under
Chinese and IAS GAAP. Further the stock prices of the two shares do not move concurrently.
Price changes in shares tend to lead those in class B shares. He has selected final sample 72
Chinese firms with both A & B shares for which information is available on stock prices, control
variables, EPS numbers under Chinese GAAP and IAS and disclosure practices to domestic and
foreign investors. Finally he concluded that despite sophisticated investors’ active involvement
in international investments. Information barriers in the form of selective disclosures and
different accounting standards have a significant impact on stock process.

 Panagliotis Arsenos et. al. (2001) the relationship between the use of International Standards
and a company level of outsiders finance. They have tested whether the companies that have a
greater proportion of outsider finance were more willing to use international Standards which
could secure them a more transport reliable & comparable presentation of their financial
reports to the outsider’s users. Taking in to account that outsider finances do not have internal
information of the company. The main hypothesis is that companies with relatively more
outsider finance are more likely to use international accounting standards. They have selected
46 sample companies for analysis. The data would be collected from the annual reports of the
companies. The outsider finance was collected from annual reports provided and ASE database,
outsider finance is constituted by outsider equity & outsider debt. They also examines that
linear regressions followed by analysis. Finally it results derived from this research, support the
hypothesis also made. It was reported that companies with more outsider finance are more
 likely to use international standards out finance is defined as the proportion of outsider equity
and the proportion of outsider debt (The long term public debt).

 Holthausen Robert et. al. (2001) have studied on the value of relevance literature for financial
accounting standard setting. In this paper evaluation, concentrates on the theories of
accounting standard setting and valuation that underlie those inferences. Unless those
underlying theories are descriptive of accounting standard setting and valuation, the value
relevance literatures reported associations between accounting numbers and common equity
valuations have limited implications or inferences for standard setting. This study concluded the
value relevance literatures tests effectively inform us about accountings role providing inputs to
equity investor valuation those tests still ignore the other role of accounting and other forces
that determine accounting standards and practice. And various fair value estimates of pension
assets and liabilities and fair value of intangible assets.

 Shukla Hitesh (2004) has examined the Indian corporate disclosures and segment reporting.
Segment reporting is a specific issue that has grown in importance and is receiving wider
recognition in the field of corporate financial reporting. Segmental disclosures are mandatory
for all the listed companies whose turnover exceeds Rs. 50 corer from April 1, 2001. It is
hypothesis that there is significant difference in the segment reporting disclosures practices in
the corporate units in India. This research seeks to provide primer evidence on segment
disclosure practices and policies of corporate units working in India. One hundred companies
were taken randomly as sample for the study of segment reporting of which 79 companies were
found fit for the disclosures required by the Accounting Standard - 17. The sample was further
dividend in to 14 industries. It is observed that there is no specific guideline was defined a
particular business line. An overview of the segmental disclosures of the whole sample was also
studied and whatever difficulties and limitations faced while reporting and corporate for the
segment brought in to light in the study.

 Leng Tan et. al. (2007) examined reporting entities in Malaysia are required to prepare their
financial statements in accordance with the adopted new and improved financial reporting
standards and the impact of the implementation of FRS on Malaysian companies accounting &
reporting practices. The objectives of the study are to identify assets & liabilities which are
recognized or not under FRS’s but not recognized or was recognized under previous GAAP.
Second to examined the effect of changes in the measurement rules of assets & liabilities in
adopting FRS’s last is to examine the reclassification if any, that were recognized under previous
GAAP as one type of assets, liability or component of equity, but area a different type of asset,
liability or component of equity under FRSs significant of the study will be able to highlight some
critical issues to the accounting regulators such as the securities commission, professional
bodies like the Malaysian Institute of Accountants, Standards Setter (MASB) and the investing
public. A survey of the first & second quarter interim reports 2006 of Malaysian top 30
companies was also conducted via the internal. The researchers have analyzed questionnaires
using the statistical SPSS software package. It concluded that some countries like Malaysia are
more fortunate as our standards are very much aligned to the international standards. On the
other hand these countries may lose out on their foreign investment as investor would prefer to
invest in companies that follow the same standards for analysis & decision making purposes.
 Tokar (2005) focuses on the impact of convergence on auditing firm and concludes that
achieving true convergence of accounting standards is a costly and time-consuming objective,
and will require a huge investment of money and a significant change in the training of
accounting students in the near future. De Jong, Rosellón Cifuentes, and Verwijmeren (2006)
demonstrated one of the economic implications of international standards. The study revealed
that 71% of the firms that are affected by IAS.

 Chand & White (2007) studied the convergence of Domestic Accounting Standards and IFRS and
also demonstrated that the influence of Multinational Enterprises and large international
accounting firms can lead to transfer of economic resources in their favor, wherein the public
interests are usually ignored. Barth et al (2008) The study found out that the Firms applying
IAS/IFRS experienced an improvement in accounting quality between the pre-adoption and post
adoption period. Carmona and Trombetta (2008) evaluated the logic and implications of the
principles-based system and suggested that the principles-based approach to the standards and
its inner flexibility. Jeanjeana and Herve Stolowya (2008) did an analysis of whether the
mandatory introduction of IFRS standards had an impact on earnings quality, and more precisely
on earnings management. Lantto & Sahlstrom (2009) the adoption of IFRS changes the
magnitude of the key accounting ratios Alfred Wagenhofer (2009) analyzed the challenges that
arise from political influences and from the pressure to sustain a successful path in the
development of standards.

 Epstein (2009) undertook to study Economic Effects of IFRS adoption by emphasizing on the fact
that universal financial reporting standards will increase market liquidity, decrease transaction
costs for investors, lower cost of capital and facilitate international capital formation and flows.
Dr. Kavita Indupurkar, Anindita Chakraborty and Ravindra Pathak (2009) reported that
maintaining consistency with the legal and the regulatory requirement, structuring of ESOP
schemes, training of employees, tax planning and also most important challenge is to ensure
that investors understand the shift from Indian GAAP to IFRS. Cai & Wong (2010) undertook a
study of global capital markets and summarized that the capital markets of the countries that
have adopted IFRS have higher degree of integration. Sai Venkateshwaran (2010) the conversion
to IFRS is a major change both for the finance function and for the wider business. Sharma
(2010) concluded that financial statements of the most of the company’s showed lower profits
after the convergence process. Dholakia (2012) revealed that there was a significance
differences in the opinion of respondents belong to different level of educations and age
regarding IFRS adoption. Nams Shah (2012) when companies located in any country are trading
globally, there is a need for global accounting standard.

 (Tarca, 2004) revealed that there was some use of ‘‘international’’ standards in all countries, but
the extent of use, and the way standard were used (that is, by adoption or supplementary use)
was in accordance with the institutional framework in each country. The findings show that
companies have voluntarily responded to pressure to produce more comparable financial
information, and that standard setters and regulators have a key role to play in promoting the
harmonization process. The study found that overall there was greater use of US GAAP than IAS.
This outcome was surprising, given that IAS are more politically neutral than US GAAP. However
it shows the influence of US GAAP in the international business environment, and demonstrates
 the importance of US capital markets and the impact of the SEC’s US GAAP reconciliation
requirements.

 (Eva K. Jermakowicz, 2006) concluded in his paper that implementing IFRS by EU publicly traded
companies as required by the IAS regulation. The regulation gives Member States an option to
extend this requirement to individual (separate) financial statements and to unlisted companies.
Most Continental EU members with a close link between financial reporting and taxation permit
the individual financial statements in accordance with IFRS but only for additional disclosure
purposes. This study examines implementation of International Financial Reporting Standards
(IFRS) by European Union (EU) companies. All listed EU companies are required to prepare their
consolidated financial statements in accordance with IFRS for years beginning on or after
January 1, 2005 (Regulation (EC) 1606/2002). It provides insight into the IFRS adoption process
based on a questionnaire sent to EU-listed companies in 2004. The 112 responses received
indicate: (1) a majority of respondents have adopted IFRS for more than just consolidation
purposes; (2) the process is costly, complex, and burdensome; (3) companies do not expect to
lower their cost of capital by implementing IFRS; (4) the more comprehensive the approach to
conversion, the more respondents tend to agree with the benefits and costs of the transition;
(5) companies expect increased volatility in financial results; (6) the complexity of IFRS as well as
the lack of implementation guidance and uniform interpretation are key challenges in
convergence; and (7) a majority of respondents would not adopt IFRS if not required by the EU
Regulation.

 (Zeff, 2007) commented in his commentary that The more rigorous the enforcement mechanism
- that is, the more authority and the larger budget a country gives to its securities market
regulator to fortify the effort to secure compliance with IFRS - the more lobbying pressure that
will be brought on the IASB, because companies in such countries will know that they have no
‘escape valve’, no way of side-stepping the adverse consequences, as they see them, of a
proposed IASB standard or interpretation. If the auditor is strict and the regulator is strict,
political lobbying of the standard setter, the IASB, may become more intense. Therefore, if a
powerful company or group of companies do not like a draft standard, they will have an
incentive to engage in politicking of the standard-setting body. We have seen that in the USA for
decades, because we have a strict securities market regulator, the SEC. As a country strengthens
its regulator, which many people think is good, one of the consequences may be more
selfinterested politicking of the IASB, which is thought by many to be bad. Hence, it becomes a
Catch-22. In the areas of comparability and convergence, there seem to be obstacles to what
might be termed ‘genuine’ comparability, and there are obstacles to convergence at a high level
of quality. Some of the obstacles are deeply cultural, while others are more susceptible to
modulation by the principal parties. It requires enlightened leadership and commitment from
the accountancy profession, including academics, audit firm partners, and company
accountants, as well as from company finance directors and national regulators and other
instrumentalities of Government, such as the European Commission, the SEC, and legislators, to
overcome these obstacles and therefore promote genuine international convergence and
comparability.

 (Salvador Carmona, 2010) reviewed in their article that the increasing globalization of the U.S.
economy drives interest in international accounting standards. In this respect, the convergence
process between the International Accounting Standards Board (IASB) and the Financial
Accounting Standards Board (FASB) targets the completion of several major projects by 2011.
The importance of the projects under consideration as well as the lack of conclusive theoretical
solutions around them suggests that the target of a “common set” of accounting standards will
be replaced in the short medium term by a de facto situation of a “slightly different set” of
accounting standards. They draw on best available practices to make a specific proposal for the
introduction of IFRS into the curriculum of institutions of higher learning in the U.S. Their
proposal is driven by the idea that accounting education should move from teaching ever
temporary rules to emphasize the economic and strategic underpinnings of accounting
transactions