IFRS convergence and accounting quality: India a case study

Ajay Adhikari, Manish Bansal and Ashish Kumar

Journal of International Accounting, Auditing and Taxation, 2021, vol. 45, issue C

Abstract: This study examines the impact on accounting quality in India after converging Indian generally accepted accounting principles (IGAAP) with International Financial Reporting Standards (IFRS). The converged form of IGAAP is referred as Indian Accounting Standards (Ind AS). Using a pre-and post-IFRS adoption period design, we compare the quality of accounting information reported under IGAAP and Ind AS. Our results show that accounting quality deteriorates immediately after the adoption of Ind AS. In particular, we document that the implementation of IFRS-converged standards results in lower variability in net income, a higher magnitude of discretionary accruals, less timely recognition of losses, and lower value relevance of reported earnings. Subsequent tests suggest that the deterioration in accounting quality ameliorates with the passage of time. The findings of the study suggest that there may be a learning curve for the benefits of IFRS adoption/convergence to diffuse over time through a system. Moreover, simply adopting or converging to IFRS without concurrent changes in institutional and enforcement frameworks may not result in improvements in accounting quality, especially in countries with weak regulatory jurisdictions. Consequently, more attention needs to be paid to implementation and diffusion issues, such as integrating IFRS intentionally in the University curriculum and providing workshops and continuing education courses to improve stakeholder familiarity with IFRS. Improvements in the institutional structures of financial reporting should also be implemented.

Keywords: IFRS; Convergence; Ind AS; Accounting quality; India (search for similar items in EconPapers)
JEL-codes: G14 M40 M48 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1061951821000550
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:45:y:2021:i:c:s1061951821000550

DOI: 10.1016/j.intaccaudtax.2021.100430

Access Statistics for this article

Journal of International Accounting, Auditing and Taxation is currently edited by R. Larson

More articles in Journal of International Accounting, Auditing and Taxation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().