Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

This is a public Custom Hive  public

research summary

    Preparers’ Perceptions of the Costs and Benefits of IFRS: E...
    research summary posted November 12, 2014 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 15.0 International Matters, 15.02 IFRS Changes – Impacts 
    Preparers’ Perceptions of the Costs and Benefits of IFRS: Evidence from Australia’s Implementation Experience
    Practical Implications:

    Respondents tended to be quite negative about IFRS, with responses conveying a strong sense of IFRS being more trouble than it was worth.  It is possible that these preparers were biased by the immediacy of the problems involved and the relative remoteness of the benefits of IFRS. It may be that preparers’ perceptions of IFRS have become more positive as the new system has bedded down and the postulated benefits realized, but we cannot tell from our data. However, the findings do provide insights about the kinds of concerns that may arise on the implementation of IFRS, from a preparers’ perspective, and so are likely to be relevant to any country taking on the IFRS challenge in the future.


    For more information on this study, please contact Richard D. Morris.


    Morris, R. D., S. J. Gray, J. Pickering, and S. Aisbitt. 2014. Preparers' Perceptions of the Costs and Benefits of IFRS: Evidence from Australia's Implementation Experience. Accounting Horizons 28 (1): 141-173.

    International Financial Reporting Standards; IFRS Adoption; IFRS Implementation; corporate perceptions; IFRS costs and benefits; Australia
    Purpose of the Study:

    IFRS adoption from 2005 in Australia was a major change for most companies.  Given the widespread adoption of IFRS around the world and the possibility of future US adoption, Australian preparers’ experiences with IFRS in the first year the new system was implemented should be of interest.  Most other studies of IFRS adoption focus on financial statement users’ reactions to IFRS and ignore preparers’ views.

    The paper reports responses to a mailed-out questionnaire survey from 305 senior financial executives in Australian listed companies, administered at the time these executives were actually implementing IFRS for the first time.  The survey thus provides unique insights into preparers’ perceived problems with implementation of IFRS, the costs involved and the benefits expected.

    Design/Method/ Approach:

    Most Australian companies have a 30 June balance date so the year ended 30 June 2006 was the first year that these companies adopted IFRS.  The questionnaire was mailed out in June 2006 and again in October 2006.  A usable sample of 305 responses was received. 

    The questionnaire asked respondents to rate on a 7 point scale 50 questions about the perceived difficulties with IFRS, the expected capital market impacts of IFRS, the one-off and ongoing costs of implementing IFRS, and the perceived benefits of IFRS. Background questions were also asked about the respondents and their companies.

    Respondent companies were broadly representative of those listed on the Australian Stock Exchange with regard to size and industry membership.  Of the respondents themselves,  92 percent have accounting qualifications, 89 percent have over 10 years accounting or financial experience and 48 percent have over 20 years experience.

    • The questionnaire responses were compressed using Principal Components Analysis into five constructs that we found ran through the data.  They are: General Issues with IFRS which captures difficulties that accounting staff were experiencing with the implementation of IFRS; Issues with Non Accounting Professionals which concern dealings with professionals such as lawyers; Benefits of IFRS which covers eight areas suggested as potential benefits of IFRS; Accounting Issues which covers eight specific accounting issues; and Capital Market Impact of IFRS which captures the perceived impact of IFRS on market valuation of equity, debt raising ability, not violating debt covenants, financing, credit ratings, dividends, earnings volatility.


    • Significantly more respondents rated as difficult, considerable, or serious, rather than as easy or little, the General Issues with IFRS and Accounting Issues.  On the other hand, significantly more respondents rated as little, rather than as significant, Capital Market Impact of IFRS and Benefits of IFRS.  Issues with Non Accounting Professionals were rated as average or below average.


    • The general tone of the responses was one of pessimism, frustration or hostility with IFRS.


    • One-off and ongoing costs of IFRS adoption were estimated to be up to $500,000 on average in each case.


    • Our multivariate analysis shows that the primary sources of concerns about the General Issues with IFRS, Issues with Non-Accounting Professionals the low level of Benefits are difficulties with specific accounting issues, the ongoing monetary costs involved and the limited capital market impact of the changes introduced.  Firm size, auditor type, and overseas listing or sales are almost always not significant.
    International Matters, Standard Setting
    IFRS Changes – Impacts