Forced Adoption of IFRS by Czech Non-Listed Companies: An Assessment of Benefits and Costs

Vynucené přijetí ifrs českými nekótovanými podniky: hodnocení přínosů a nákladů

David Procházka

Acta Oeconomica Pragensia, 2016, vol. 2016, issue 2, 46-62

Abstract: The paper deals with the effects of IFRS adoption by a specific group of companies. It focuses on the so-called forced IFRS adopters, which are such private (non-listed) companies that (a) are forced to adopt the IFRS (because their parent prepares IFRS consolidated statements) and simultaneously (b) are not permitted by the regulatory framework of a given jurisdiction to apply the IFRS in their individual financial statements on a voluntary basis. In particular, benefits and costs connected with the forced IFRS adoption by Czech private companies are assessed. The results, based on a questionnaire survey among affected companies, confirm the intuitive presumption that accounting treatment of certain items significantly differs between Czech GAAP and IFRS, which requires the use of advanced methods for the conversion of financial statements. Regardless of which conversion method is used, perceptions of both benefits and appropriateness of incurred costs vary across entities. The benefit-to-cost ratio for the two most commonly used conversion methods (spreadsheets and dual accounting software) is comparable, as the first method generates fewer benefits for lower costs and the second method is connected with more benefits, but at higher costs. Finally, the survey reveals that actual costs of IFRS adoption are higher than the expected costs regardless of the conversion method applied.

Keywords: IFRS; mandatory; voluntary and forced adoption; Czech private companies; conversion of financial statements (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.18267/j.aop.528

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