Additionally translating this knowledge in the context of the countrys legal

Additionally translating this knowledge in the

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from the lack of enough accountants who are trained on handling IFRS reporting matters. Additionally, translating this knowledge in the context of the country’s legal framework and corporate requirements can be an uphill task especially for a country that is just starting out. Training resource applicable to the country may take long to prepare which leaves many accountants willing to undertake training unable to do so on time. This can delay reporting which can contribute to various challenges and costs. Further, when this reporting has to comply with local tax laws, the process might be very complex and hindered by legal bottlenecks. Conceptual Framework Adoption of IFRS in developing countries has taken place following a theoretical framework isomorphism. The isomorphism types include the coercive, mimetic and normative models. Either the external environment or the legal system enhances the coercive environment (DiMaggio and Powell 1991). It is the pressure exerted directly or indirectly by entities on is dependent. Countries have been forced to adopt these IFRS standards due to the external business and political environment. This includes donors who persist on the need to comply and investors who also demand to see the same. On the part of local corporations, governments have demanded compliance from companies to ensure uniformity and as part of corporate governance and regulation. On the mimetic front, governments and companies in
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Accounting in Emerging Economies 7 developing countries have adopted these standards due to increasing economic growth. Expansion of economies has necessitated the adoption of these standards. In the normative realm, adoption has occurred due to the influence of the capital market. Capital market has created the need for compliance while compliance has also led to the growth of capital market (Chua and Taylor 2008). This shows that the industry is a key player in the influence of local financial reporting standards. Although this isomorphism led to adoption of global accounting standards by developing countries, there has been some criticism on the mechanism of adoption. The major criticism is related to coercion. Debate related to coercion of developing countries to adopt the standard has always taken the position of political interference. Many feel that developed nations bully developing countries to adopt the models that would does not work and is aimed at crippling development. The perception is that coercion has mostly to do with interference of internal affairs of these countries to guarantee neo-colonialism. Key Findings Coercive environment is a key driver towards adoption of IFRS in China and India. These countries’ governments have found IFRS necessary due to pressure exerted by donors and development partners. This is due to the demand for credibility and accountability for borrowed or donor funds. Additionally, these strict requirements have been a basis for securing such funding since donors and lending agencies such as the World Bank require them in assessing the nation’s credibility. Nonetheless, Chinese and Indian firms have been able to comply due to legal requirements set by their home governments regarding financial reporting. Cooperating between local firms and conglomerates create this necessity for
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  • Spring '20
  • International Financial Reporting Standards, Developed country

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