Implementation Of International Financial Reporting Standards In European Countries

Problem definition and Research question

International financial reporting standards have been adopted by many countries around the world. Specifically for European countries, the implementation of IFRS has been mandatory in the preparation of the financial statements for all publicly listed companies since 2005 while some firms had already voluntarily adopted the international standards since 2002. Recently, many other countries from the developing world such as China, Brazil, India and Mexico have either adopted, permitted or converged with IFRS. The main purpose of the worldwide implementation of IFRS is comparability and transparency of financial results. Moreover, financial information is available to a wider range of markets and thus, the standards are beneficial for global investments. The major characteristic of IFRS is the use of fair value in accounting. Plenty are the benefits that international financial reporting standards offer with most notably mentioned; internationally accepted high quality standards, capital markets became more efficient and cost effective while firms have become more competitive globally and consequently, IFRS help the European economy develop (Jeajean and Stolowy, 2008). Previous studies focused on the characteristics of the countries that incorporate IFRS as

The two international organizations have made different discriminations. The classification criterion the World Bank uses is the Gross National Income (GNI) per capita while IMF does not have an explicit measurement, however, I will use the classification of IMF in order to be consistent and because the World Bank has categorizes the countries into high-, middle- and low- income making the characterization of “emerging”