Addis Ababa University

College of Business and Economics

School of Commerce

Department of Corporate Finance (Specialty in Investment Management)

Post graduate MSc. Students

Assignment of: Business Research Method

Article Review on: Determinants and Consequence of Adopting International

Financial Reporting Standards (IFRS)

Reviewed by; Group Two members

Name Id no
1. Ethiopia Girma___________________________ GSE/3821/16
2. Eyerus Girma____________________________ GSE/1346/16
3. Behailu Atnafu___________________________ GSE/8105/16
4. Biruk Anteneh___________________________ GSE/5249/16
5. Bantamlak Fikadu________________________ GSE/2360/16

Submitted to: Dr. Berhanu B. (PhD)

Submission date: 01/01/202
Article Review

1. Citation:

Determinants and Consequence of Adopting International Financial Reporting Standards

(IFRS): A Systematic Literature Review, Abonwara, K. M., Ahmad, N. L., & Abdul Halim,
H. International Journal of Contemporary Management and Information Technology
(IJCMIT), 2021, 1, 3, 39-48

2. Summary:
The article titled "Determinants and Consequences of Adopting International Financial
Reporting Standards (IFRS): A Systematic Literature Review" published in the International
Journal of Contemporary Management and Information Technology provides a systematic
review of 48 articles on the predictors and consequences of adopting IFRS. The review
primarily focuses on studies conducted in the European Union (EU) and several other
countries. The findings suggest mixed results regarding the usage of IFRS, with some studies
indicating positive impacts on company performance while others suggest additional costs
and negative effects. The predictors of IFRS adoption vary depending on the country and
industry context, with factors such as education, accounting capabilities, organizational size
and age, and macroeconomic factors playing a role.
The article emphasizes the need for more research to understand the role of IFRS in
developing countries. The review utilizes various research approaches, including empirical
studies, review studies, and interviews, with statistical software like SPSS and Stata being
commonly used for data analysis. The article concludes that more studies are needed to
further explore the predictors and consequences of IFRS adoption, particularly in developing
countries.
3. Study purpose:
A. Does the author clearly define a research problem or topic? And is its
significance explained? Are core issues or research variables identified?
 The purpose of the study is clearly stated: to review the literature on the predictors and
consequences of adopting IFRS but the research questions are not explicitly stated in the
article.

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 Throughout the introduction the research also points out the problem that despite the
intended benefits of IFRS, companies and countries are hesitant to adopt the system due
to concerns related to accounting capabilities, compatibility, complexity, and government
regulation. In addition, the research emphasizes the need for systematic understanding
and review of the literature because empirical studies outperform the review studies in
the topic. For the sake of clarity, it would have been better if the authors put the purpose
of the research and the problem statement under separate sections.
 The research implicitly states that the research aims to bring clarity regarding the
predictors and consequences of adopting IFRS, because there are mixed findings in the
literature written in the area. Additionally, the research indicates there is a need to
understand the role of IFRS in developing countries. However, the authors should have
explicitly stated what makes the study valuable.
B. Is specialized terminology usefully defined?
 The main terminology that needed proper explanation and definition was IFRS, and the authors
correctly defined the term in the start of the introduction section. However, there were some
terminologies such as ROA and ROE that needed defining for readers with no accounting
background.
4. Literature Review
A. Was relevant background literature reviewed?
 In the given article, there is no well-presented literature review including the empirical
literature review, the theoretical literature review and also there is no well-constructed
conceptual framework.
 The author discusses current research on the predictors and consequences of adopting
IFRS.
 The author provides a literature review by reviewing 48 articles but it is unclear what the
research objectives, hypothesis, or specific research questions were and the authors
should have stated these clearly.
5. Methodology
 The research aimed to provide a comprehensive understanding of existing research on the
consequences and predictors of adopting IFRS for countries and organizations using a

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 systematic literature review. Therefore, the authors did not engage in any form of primary
data collocation such as survey, interviews, or questionnaire.
 The research identified 323 articles written in the area from reliable journals and
databases by using keyword search method and selected 48 relevant articles, through
three screening phases where authors took out outdated articles, duplicated articles,
irrelevant articles and non-English articles.
 However, the research did not assess the possible limitations of the research design and
methodology used to conduct the research. Which puts in question the reliability of the
methodology utilized.
6. Results:
A. What are the author's major findings and conclusions? Have these been
supported by the author's analyses, arguments, findings or evidence? Has the
author overlooked anything?
 After conducting the research, the authors found that the consequences of IFRS adoption
remain unclear and mixed both for developed and developing countries. On the other side
the predictors of IFRS adoption in developing countries were identified which were in the
case of individuals: Education and Accounting capability, in the case of organization:
Size, Age, and Readiness, and in the case of a country: Legal system, Regulation, and
Political ties. However, variables that predicted the adoption of IFRS in developed
countries were not identified because most of the studies were focused on the
consequence of adopting.
 The finding was not clearly presented, thorough analysis was not conducted to support
the conclusion and misinterpretations of information were made. For example, the
finding from one of the articles cited in the research states that:
“Local comparability is adversely affected if both IFRS and local accounting standards
are applied in the same country at the same time. Reforms to bring local rules into line
with international standards are therefore urgent. We also find that there has been no
improvement in the relevance of financial reporting to local stock market operators
because the gap between book and market values is wider when IFRS are applied.”
(Susana et al. 2007, p.148).

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 The author’s takeaway was: “The adoption of IFRS has a reversal impact on the ratio
such as ROE and ROA of the Spanish companies.”
 Correct takeaway: Applying both IFRS and local accounting standards
simultaneously in a country negatively impacts local comparability between
organizations. And local stock market operators didn’t observe improvement in
financial reporting because the disparity between book values and market values
increased when IFRS was adopted.
 Another finding from the source of research states that “We find an incrementally
positive reaction for firms with lower quality pre-adoption information, which is
more pronounced for banks, and with higher pre-adoption information
asymmetry, consistent with investors expecting net information quality benefits
from IFRS adoption. We find an incrementally negative reaction for firms
domiciled in code law countries, consistent with investors' concerns over
enforcement of IFRS in those countries.” (Christopher et al. 2010, 31)
 The authors takeaway: “The findings indicated that the adoption of IFRS has
enhanced the quality of information. However, the authors highlighted that the
positive effect is not consistent in all countries and there are inconclusive findings
regarding the adoption of IFRS and its impact on companies.”
 Correct takeaway: Adoption of IFRS by firms has a positive impact on
investors’ confidence, because investors anticipate an increase in the quality
information, especially when firms information quality was low prior to adopting
IFRS. However, adoption of IFRS has a negative impact on investors' confidence
when the firms are located in code law countries, because investors are concerned
about the enforcement of IFRS in these countries.
7. Discussion
A. Do the research results validate the author’s conclusions and/or
recommendations?
 The research finding was not structurally presented and lacked proper analysis to support
its conclusion. It was possible for the authors to take structured analytical steps to
synthesize the article. After creating the first table to classify the articles, the authors
could have further classified the articles for a better understanding of the information and

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 then take out the findings observed and the variables that were being measured by each of
the articles.
 For example, we can group the studies into four groups as suggested down below it will
give us a better understanding of where the current literature are focusing.
 Articles that study the predictors of IFRS adoption at an organizational level.
 Articles that study the consequence of adopting IFRS at an organizational level.
 Articles that study the predictors of IFRS adoption at a country level.
 Articles that study the consequence of adopting IFRS at a country level.
 We can then try to extract the variable being measured for example:
 The Articles that studied the predictors of IFRS adoption at an organizational
level identified and measured four variables as predictors of IFRS adoption.
 The management’s level of education
 Size of the business
 Government regulation
 Satisfaction with the current accounting system
8. References
A. Are references given (footnotes or bibliography)? What is the size of the
reference section? Are the references recent, important? How are the references
used: for support, rebuttal, etc.?
 In the given article the authors used a Vancouver type of referencing style. The
article does not provide any references in the form of footnotes and bibliography.
This limits the ability to evaluate the source and credibility of the information
presented.
 The research referenced 55 articles, the majority of which were recent. The
references played a supportive role for the authors finding and conclusions. The
research referenced 55 articles, the majority of which were recent. The references
played a supportive role for the authors finding and conclusions.
9. Suggestion for future research:
A. Does the author suggest areas for further research or discussion?

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  The authors suggest that more studies are needed to identify the role of IFRS in
the context of developing countries. This indicates a potential area for future
research and discussion.

10. Synthesis with class material:

A. How is the article related to the course contents?

 The research methodology utilized for this research (Systematic literature review)
stands out from the ones we were discussing in our class as the primary aim of
this methodology is to provide a comprehensive and unbiased summary of the
current state of knowledge on a particular research question.

 The research demonstrated the practical application of the tools and techniques
we discussed specifically regarding analysis techniques in qualitative research.

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References:

 Armstrong, C. S., Barth, M. E., Jagolinzer, A. D., & Riedl, E. J. (2010). Market Reaction
to the Adoption of IFRS in Europe. The Accounting Review, 85(1), 31-61.
 Callao, S., Jarne, J. I., & Laínez, J. A. (2007). Adoption of IFRS in Spain: Effect on the
comparability and relevance of financial reporting. Journal of International Accounting,
Auditing and Taxation, 16(2), 148-178.