All nations are suitable for using IFRS, but because of their unique economic, social, and cultural

factors most of them tend to set their own standards or adopt IFRS with modification.

PNG institute of Accountants (PNGIA) has adopted the entire IFRS, while FIA has adopted only the
relevant IFRS.

Fiji started adopting the IFRS after 1st July 2001. The Accounting and Auditing Standards Committee
(AASC) intends to realign Fiji accounting standards with IFRS every five years. The relevant IFRS are
adopted either completely or with modifications to be in line with the other regulations, such as the
company law.

The Fiji Institute Of accountants (FIA) argued that:

“The adoption of the IFRSs will immediately make accountability in Fiji recognised to an international
benchmark. If the institute has to develop its own standards then it will have trouble making these
standards compatible and accepted internationally. So that is one of the major aspects of the
alignment towards the IFRSs.” (IT No.4-ii-Fiji, P.2)

“FIA cannot dictate to the world in terms of what generally accepted accounting principles should
be. We obviously follow what happens overseas. As we do not have the funds for research, thus one
easy way for us is to have standards developed by our sister institutes and adopt theirs to start off.”
(IT No.4-i-Fiji, P.5)

Accounting reports are the devices used to express actual and planned operations and to inform the
stakeholders of the operations of enterprises in the country. For these reports to be useful to users,
a certain degree of uniformity is required, because only then can they be used as a basis for
comparisons between different firms in terms of efficiency and productivity.

The consistency in reporting helps the central government in decision-making. As the institute
argues that:

“The government is constantly looking at assessing the performances of public enterprises. The way
in which it can do that is to measure the performance against those of other countries. It can only be
measured effectively if the measurement is done by using the same rule. Therefore, international
benchmarks and the setting of performance targets would have to revolve around the adoption of
some consistent measure, that is, similar standards. ” (IT No.4-ii-Fiji, P.3)
Because the resources in Fiji are limited and there aren’t any full time research personnel to do the
research within with in the FIA’s AASC, the most efficient and effective way to keep pace with
changes in accounting standards is to adopt the IFRS and review the changes as they occur.

A problem with the IFRSs is that they are not very specific and they require professional judgements
from the preparers. As an accountant in Fiji argued:

“Accountants may find difficulty in applying, as in the IFRSs the wording is somewhat general so it
makes it hard for members to apply them, particularly if they are smaller or sole practitioner or
general members in Fiji themselves.” (IT No.4-i-Fiji, P.2)

Not all FIA members are associated with a multinational accounting firm nor do they have access to
relevant continuing professional education courses. For such accountants, interpreting and applying
those standards can be difficult. The institute of accountants should examine the IFRSs and decide
whether they are useful to members or whether they should provide explanatory notes to the
standards.

Individual standards must be in line with other legislative requirements, if a standard contravene a
law within the country then it must be amended.

After adopting the IFRSs, the institute of accountants has to constantly updating and reissuing them
as they are being updated internationally. Pacific countries with limited resources could ask for
professional assistance from the IASB or overseas accounting bodies.

A survey in Fiji had revealed that accounting practitioners are facing difficulties when trying to
interpret and applying the IFRS. The reason is because not a single generally accepted accounting
practice is specified in the IFRS.

For example:

IFRS 2 still makes reference to the last-in-first-out (LIFO) method of inventory valuation which is still
in use in the USA but not widely accepted elsewhere. It also gives too much freedom to companies
to exploit different treatments, which leads to lack of consistency.

In order to ease the problems associated with the IFRS, the institute of accountants should provide
adequate training, implement some of the IFRSs at first then others rather than implementing all at
once and provide explanatory notes to the IFRSs.

Certain standards especially the ones issued after the 1990s require accountants to exercise greater
judgement than before, for example IFRS 27. This certainly pose greater difficulties in a lot of Pacific
countries such as Fiji, Vanuatu and Solomon, due to substantial migration of its skilled people. It also
affects accounting and auditing within the country.

Some suggestion to counteract the judgement difficulties and improve accountant skills include:

 Provide support for a comprehensive review of bookkeeping and accountancy skills needs
within the public and private sectors.
 Design a framework of professional qualifications that are appropriate to the needs of
both public and private sectors in the Pacific island environment.
 Establish professional bookkeeping and accountancy qualifications.
 Development of licensure criteria and examinations for each qualification (ADB 2002)

The examples of specific accounting standards that are successful in Fiji

FIA has been applying all extant IFRS numbered 1-31

Specific standards that Fiji finds difficulties dealing with.

Some standards are only considered as guidance standards meaning although reporting entities are
to refer to these standards and apply them where possible, the application is not mandatory. Firstly,
it’s because the standards may not be relevant, for example, in the case of IFRS 29, the standard
addresses a problem that Fiji does not presently experience, as its inflation rate for the past 10 years
have remained below 10% per annum. The same applies to the case of IFRS 19 and IFRS 26, which
relates to reporting entity-sponsored pension schemes. There are no such plan in Fiji. Secondly, even
if the standard is relevant, some organisations may have difficulty in complying or may simply not
comply, for the reason that there are practical problems associated with these standards. Thus, the
institute insists that it is better to wait and see how the other, more established, professional
accountancy bodies cope with these problems.

IFRS ADOPTION IN PACIFIC ISLAND ECONOMIES: A POLITICAL PERSPECTIVE

Tourism provides a competitive advantage to small island economies because of their exceptional
locations, natural and cultural resources and hence, attract foreign investments in their tourism
industry.

Political, economic, social, cultural and environmental factors contribute to shaping accounting
standards of a country.

Globalization has made IFRS important to many countries including small island economies.

Some country’s accounting standards are mostly influenced by their mother country such as the
American Samoa, and New Caledonia.
 Adopting International Financial Reporting Standards (IFRS) - A focus on Nigeria

The opportunity cost arise because in adopting IFRS, countries forgo the benefits of any past and
potential innovations in local reporting standards specific to their economies. In many developing
countries, the quality of local governance institutions are low and thus are likely to suffer from
corrupt, slow moving, or ineffectual governments that are resistant to or incapable of change.
Therefore, having the chance to adopt an externally developed body of accounting standards does
present an advantage.

Key success factors for IFRS adopting

Preparer’s → 1. Professional support with IFRS__2. Having technology in place to support conversion

User’s → 1. Self-enforcement by companies___2. Professional support with IFRS experience

IFRS ADOPTION IN FIJI

2006, FIA decided to adopt IFRS to achieve an internationally recognized accountability system. In
2009, FIA decided to adopt IFRS for SMEs for all incorporated small and medium sized reporting
entities.

The biggest challenge that exists in adopting IFRS for SMEs is in providing adequate training to equip
practitioners with the necessary skills before the first set of financials are prepared. Small firms are
facing challenges in developing IFRS related skills to help ensure compliance, transparency and to
provide opinion on financial statements. However, these firms may lack the necessary resources and
expertise to conduct in-house training for their employees and therefore rely on institutes of
accountants within their country to provide training and education support. But, within some
countries in the Pacific, the institute of accountants relies on IASB for educational and training
materials, as it does not have enough funding and expertise to develop them by themselves.
Examples of such countries include Fiji, Solomon and PNG.

The international Accounting standard board has not set any specific boundary to determine which
entity should be classified as small and medium, but rather left the decision to regulatory authorities
and standard setters in individual jurisdictions. This creates an issue for the institute of accountants
in setting the criteria in defining “small and medium sized entities” and outlining its boundaries.

IASB stated that the adoption of any new reporting framework would at first cost huge amounts,
both to the profession and the reporting entities. Such costs includes training employees, updating
information systems, meeting increased auditing costs, and meeting the costs of legal and
professional fees to address the impacts on existing contracts and agreements. While the profession
has no trouble incurring such costs in providing training and educational support to its members,
small and medium sized entities would face a lot of challenges to implement IFRS for SMEs as their
financial reporting framework.

The success of any set of accounting standards is having accountants and auditors with sufficient
educational background. Therefore, universities can help by updating their curriculum by
incorporating newer standards like IFRS for SMEs in their degree programs. For example, universities
in Fiji have already incorporated IFRS into their programs in the year 2012 and probably include IFRS
for SMEs shortly after.

Reporting entities are required by law to report their financial performance in compliance in
compliance with IFRS. For example, in Fiji all small and medium sized entities are required by law as
of 1st January 2011 and onwards, are to report their financial performance following the IFRS of SME.

The adoption of internal reporting standards by reporting entities in emerging economies is likely to
benefit such economies in many aspects. The biggest advantage is having an internationally
recognized financial reporting framework. Such framework could improve SME’s access to credit and
equity capital, upgrade the profession’s competency levels through education and training, reduce
audit inefficiencies and ease the burden of financial reporting on small and medium sized entities in
countries where full IFRS is required. Comparability is also improved and it is likely to result in quality
investment decisions, and increase the SME’s ability to access funds, and secure investments from
overseas investors.

Emerging economies face enormous difficulties in developing its own financial reporting standards
due to the fact that the process requires huge amounts of funds, resources and expertise. Therefore,
they depend heavily on IASB to develop standards for them.

A reporting entity that adopts IFRS for SMEs will incur costs in training employees, updating their
information and financial reporting system and hiring experts to assist in the transition. For this
reason, many SMEs are unwilling to adopt IFRS for SME because they are being concerned about the
cost being greater than the benefits.

The primary purpose of preparing financial reports is to meet the information needs of users. The
accounting standard plays a very important role in achieving this objective. Standard setters
therefore must ensure that standards developed facilitates the achievement of this objective than
resulted in a set of standards that serve no purpose rendering them to be useless towards local
reporting environment.
Although IASB freely provides all the necessary guidelines and interpretations for the standards that
it developed, there is still a need for local practitioners to undergo face-to-face training, because our
local reporting environment is significantly different from the environment in which the standards
were developed. Practitioners need to understand the differences that exists between the two
environments and the implications of the standard in local context. This can also enhance the
professional competency and market ability status of practitioners.