Even though conglomerates in these nations have used US GAAP over the years

Even though conglomerates in these nations have used

This preview shows page 3 - 5 out of 12 pages.

isolate themselves from international accounting norms. Even though conglomerates in these nations have used US GAAP over the years, Cieslewicz (2014) mentions that US GAAP cannot be the planet’s accounting language. As such, Indian and Chinese accounting systems must be harmonised with IFRS. Since the early 2000s, the accounting regulators in China and India has sought several harmonisation stratagems with the IASB, with the goal of attaining global convergence of accounting ideals along with promoting unified capital markets. Regardless of the significance and size of their capital markets, India and China have endured massive pressure based on the opinion that their standards are ‘not the same to IFRS’. What is more, the need for acknowledgment of Indian and Chinese GAAP in global markets (see Chua and Taylor 2008) has also been a force in harmonising national GAAP and IFRS and for the countries to accept IFRS. Literature Review Various researchers have argued that that accounting and reporting standards depend heavily on cultural, legal, and institutional structures. These aspects differ from one country to another. National economic culture has direct influence on institutions of the individual country (Cieslewicz 2014; Tanaka 2011). These structures differ from among regions, counties, and firms (Nurunnabi 2015). Businesses operating in major urban centers show
Image of page 3
Accounting in Emerging Economies 4 higher level of compliance than those operating in remote areas. Additionally, businesses that interact with foreign firms also show higher level of compliance than those who deal solely with other local firms. However, most scholars view the adoption of IFRS as the first step towards building of a level playing field for all companies and countries regardless of the region of operation or level of development (Murphy 2000). With developing countries facing cultural, legal, and institutional challenges adoption of these standards have been affected. However, with increasing investment and pressure from strategic business partners, lenders, and donors, many developing countries have woken up to the new reality of global accounting standards. Several studies carried in developing countries have reported numerous benefits of IFRS adoption by these countries. For example, researchers found that firms showed improved quality of accounting after adoption than they did prior to adoption (Madawaki 2012). Other researchers found that adoption of IFRS enhances market liquidity in the developing countries (Epstein 2009). This is because investors demand genuine financial statements that are difficult to manipulate. On the national level, donors and strategic business partners demand compliance with these standards as a precondition for any financial engagement (Bhattacharjee and Islam 2009). Politicians in these countries do this in order to prevent corruption and misuse of resources. Other researchers found that adoption of IFRS increases integration for capital markets for countries that adopt the standards and reduce the need for preparation of several reports (Cai and Wong 2010). Irvine and Lucas (2006) discovered that countries that adopted the standards attracted more foreign investment than those that did not. Chai et al. (2010) discovered that countries that adopted the standards
Image of page 4
Image of page 5

You've reached the end of your free preview.

Want to read all 12 pages?

  • Spring '20
  • International Financial Reporting Standards, Developed country

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors