Adoption of IFRS

IFRS are used in many parts of the world, including the European Union, Hong
Kong, Australia, Malaysia, Pakistan, India, GCC countries, Russia, South
Africa, Singapore and Turkey. As of August 27, 2008, more than 100 countries around
the world, including all of Europe, currently require or permit IFRS reporting.
Approximately 85 of those countries require IFRS reporting for all domestic, listed
companies.
For a current overview see IAS PLUS's list of all countries that have adopted IFRS.

Australia
The Australian Accounting Standards Board (AASB) has issued 'Australian equivalents
to IFRS' (A-IFRS), numbering IFRS standards as AASB 1-8 and IAS standards as AASB
101 - 141. Australian equivalents to SIC and IFRIC Interpretations have also been issued,
along with a number of 'domestic' standards and interpretations. These pronouncements
replaced previous Australian generally accepted accounting principles with effect from
annual reporting periods beginning on or after 1 January 2005 (i.e. 30 June 2006 was the
first report prepared under IFRS-equivalent standards for June year ends). To this end,
Australia, along with Europe and a few other countries, was one of the initial adopters of
IFRS for domestic purposes.
The AASB has made certain amendments to the IASB pronouncements in making A-
IFRS, however these generally have the effect of eliminating an option under IFRS,
introducing additional disclosures or implementing requirements for not-for-profit
entities, rather than departing from IFRS for Australian entities. Accordingly, for-profit
entities that prepare financial statements in accordance with A-IFRS are able to make an
unreserved statement of compliance with IFRS.
The AASB continues to mirror changes made by the IASB as local pronouncements. In
addition, over recent years, the AASB has issued so-called 'Amending Standards' to
reverse some of the initial changes made to the IFRS text for local terminology
differences, to reinstate options and eliminate some Australian-specific disclosure. There
are some calls for Australia to simply adopt IFRS without 'Australianising' them and this
has resulted in the AASB itself looking at alternative ways of adopting IFRS in Australia.
Canada
The use of IFRS will be required in 2011 for Canadian publicly accountable profit-
oriented enterprises. This includes public companies and other “profit-orientated
enterprises that are responsible to large or diverse groups of shareholders.”

European Union
All listed EU companies have been required to use IFRS since 2005.
In order to be approved for use in the EU, standards must be endorsed by the Accounting
Regulatory Committee (ARC), which includes representatives of member state
governments and is advised by a group of accounting experts known as the European
Financial Reporting Advisory Group. As a result IFRS as applied in the EU may differ
from that used elsewhere.
Parts of the standard IAS 39: Financial Instruments: Recognition and Measurement were
not originally approved by the ARC. IAS 39 was subsequently amended, removing the
option to record financial liabilities at fair value, and the ARC approved the amended
version. The IASB is working with the EU to find an acceptable way to remove a
remaining anomaly in respect of hedge accounting.

Russia
The government of Russia has been implementing a program to harmonize its national
accounting standards with IFRS since 1998. Since then twenty new accounting standards
were issued by the Ministry of Finance of the Russian Federation aiming to align
accounting practices with IFRS. Despite these efforts essential differences
between national accounting standards and IFRS remain. Since 2004 all commercial
banks have been obliged to prepare financial statements in accordance with both national
accounting standards and IFRS. Full transition to IFRS is delayed and is expected to take
place from 2011.
Turkey
Turkish Accounting Standards Board translated IFRS into Turkish in 2006. Since 2006
Turkish companies listed in Istanbul Stock Exchange are required to prepare IFRS
reports.

Singapore
In Singapore the Accounting Standards Committee (ASC) is in charge of standard
setting. Singapore closely models its Financial Reporting Standards (FRS) according to
the IFRS, with appropriate changes made to suit the Singapore context. Before a standard
is enacted, consultations with the IASB are made to ensure consistency of core principles.

United States and convergence with US GAAP

In 2002 at a meeting in Norwalk, Connecticut, the IASB and the US Financial
Accounting Standards Board agreed to harmonize their agenda and work towards
reducing differences between IFRS and US GAAP (the Norwalk Agreement). In
February 2006 FASB and IASB issued a Memorandum of Understanding including a
program of topics on which the two bodies will seek to achieve convergence by 2008.
US companies registered with the United States Securities and Exchange
Commission must file financial statements prepared in accordance with US GAAP. Until
2007, foreign private issuers were required to file financial statements prepared either (a)
under US GAAP or (b) in accordance with local accounting principles or IFRS with a
footnote reconciling from local principles or IFRS to US GAAP. This reconciliation
imposed extra expense on companies which are listed on exchanges both in the US and
another country. From 2008, foreign private issuers are additionally permitted to file
financial statements in accordance with IFRS as issued by the IASB without
reconciliation to US GAAP. There is broad expectation among U.S. companies that the
SEC will move to allow or require them to use IFRS in the near future and a growing
acceptance of that scenario, according to Controllers' Leadership Roundtable survey data.
In August 2008, the SEC announced a timetable that would allow some companies to
report under IFRS as soon as 2010 and require it of all companies by 2014.

Culture (National and Organisational Culture)

National culture
The importance of culture is well recognised in the accounting literature. Harrison and
McKinnon (1986), followed by Gray (1988), propose a methodological framework that
incorporates culture when analysing changes in corporate financial reporting regulation at
the national level. The review of cross-cultural research has shown that culture is an
important environmental factor that influences a country's accounting system [Harrison &
McKinnon, 1999 (for a review)] and a number of recent studies have shown that culture
also influences
120 Factors causing differences in financial reporting practices the judgments of
professional accountants in various contexts (for example, Schultz & Lopez, 2001;
Doupnik & Richter, 2003, 2004).
There is no doubt that huge cultural differences between the developed nations of
Australia and New Zealand and the other South Pacific countries such as Papua New
Guinea and Fiji continue to exist. Even though all the countries in the sample are UK
colonies, cultural values in these nations differ. For example, though Australia and Fiji
have common sets of financial reports and close geographical, colonial and professional
(accounting) links, they have two very distinct cultures (McKinnon, 1986, p. 29). While
Australia is a low uncertainty avoidance society (Hofstede, 1980), Fiji, in contrast, is a
high uncertainty avoidance society where professional accountants are reluctant to
exercise their professional judgment (Chand & White, 2006).
The South Pacific Island countries are strongly affected by external cultural influences,
perhaps due to their small size, underdeveloped state or former colonial status. These
culturally dominated countries use an accounting system based on that of another country
even when this system appears to be inappropriate for their current commercial needs
(Hove, 1986). Evidence shows that cross-cultural differences among professional
accountants can affect the meaning associated with, and hence judgment in applying,
accounting standards (Doupnik & Richter, 2003, p. 18). Consequently, the judgments of
professional accountants in developed countries will be significantly different from those
in developing countries despite the fact that each of them has similar accounting
standards. Therefore, no matter to what extent countries converge with IFRSs, accounting
standards may not be interpreted and applied in a consistent manner. As a consequence,
financial reports across countries may not be comparable despite adoption of IFRSs.
Organisational culture
A vast majority of the professional accountants' judgment literature has examined the
judgments of auditors from Big 4 accounting firms in various contexts. Big 4 judgments
may not, however, be representative of the judgements of all professional accountants.
This may be due to differences in organisational cultures between Big 4 and non–Big 4
accounting firms. If the judgments of Big 4 and non–Big 4 professional accountants
differ significantly, this implies a challenge for accounting standards convergence.
The Big 4 multinational accounting firms contribute to global accounting convergence
while also modelling how the convergence process works in large organisations (Cooper,
Greenwood, Hinings, & Brown, 1998, p. 531). Evidence from a number of prior studies
that have examined the differences in the organisational cultures of accounting firms
suggests that there are many similarities in the organisational cultures of big
multinational accounting firms (Cushing & Loebbecke, 1986; Manson, McCartney,
Sherer, & Wallace, 1998; Patel, 2003). Organisational culture symbolises shared values
and beliefs that, in turn, influence individual judgment (Schein, 1985; Etzioni, 1988;
Windsor, 2000; Patel, 2003). Within the Big 4 multinational accounting firms there has
been a focus on the development of manuals and other resources that provide details
related to the interpretation and application of accounting standards. This is done to
ensure within-firm consensus and consistency (Cushing & Loebbecke, 1986; Manson et
al., 1998; Lennox, 1999; Lin, Fraser, & Hatherly, 2003).
For the countries in the South Pacific, the head offices of the major international
accounting firms are based in Australia. These head offices closely monitor and serve the
needs of existing branches, including those in Papua New Guinea and Fiji. Therefore, for
the international accounting firms, the organisational culture is quite homogeneous. This
within-firm homogeneity, however, does not imply a within-nation homogeneity of
accounting practices as each country is also served by local firms. While we expect that
the Big 4 professional accountants may have the required training and resources to
interpret and adequately apply IFRSs, non–Big 4 professional accountants may face
difficulty in interpreting and applying IFRSs. Hence, there may be a disparity in terms of
the service provided by the international accounting firms and that of the local firms. For
example, the status of the professional accountancy body in Papua New Guinea is
undermined by the lack of well-qualified practicing accountants (Chand, 2005).
Organisational culture appears to be, therefore, an important factor that affects how
accounting standards are interpreted and applied in the post-convergence period