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A study of early and late adopters of International Financial Reporting Standards in New Zealand : a thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Accounting at Massey University, Albany, New Zealand
This study investigates accounting choice relating to the timing of adoption of International
Financial Reporting Standards (IFRS) in New Zealand i.e., the choice to voluntarily early
adopt IFRS or to defer adoption of IFRS until it became mandatory. Results for 40 early
adopters are measured against those of a control group of 40 late adopters. The study
includes an examination of the impact of IFRS on financial information (IFRS differences),
as well as analyses of qualitative information obtained from discretionary narratives in
annual reports, questionnaires and interviews.
Significant IFRS differences are found for most financial statement elements and ratios for
both early and late adopters. However, when IFRS differences for early adopters are
compared to those for late adopters, the difference-in-differences are not found to be
significant. Hence, IFRS differences result in incentives which may influence adoption
timing, but these incentives are not significantly different for early and late adopters.
Content analysis of discretionary narratives in annual reports reveals significant differences
for all four of the measures used to assess the extent of disclosures, with early adopters
providing typically twice as much disclosure as late adopters. Further analysis relating to
the nature of disclosures reveals three major themes: ‘informing of importance’, ‘potency’
and ‘evaluative’. For the first two of these themes, significant differences are found and
early adoption persists as a significant explanatory variable, after controlling for other
incentives for voluntary disclosure, such as firm size, auditor and industry. ‘Evaluative’
disclosures are made by relatively few firms; are predominantly negative regarding IFRS
adoption and no significant differences between early and late adopters are found for this
theme. Disclosure findings reflect that early adopters attach a higher level of importance to
IFRS adoption than late adopters. Survey data reveals significant differences for one of six
measures of costs of IFRS as well as for a constructed ‘overall benefits’ score and three of
nine individual benefits assessed. Also, three further themes emerge from content analysis
of responses regarding motivations for adoption timing, namely ‘activity’, ‘manageability’
and ‘accounting choice’.
Overall, the findings triangulate to suggest that ‘accounting choice’ has less explanatory
power, with regard to adoption timing decisions, than ‘other factors’ which are unrelated to
the impact of IFRS on accounting information. Examples of such ‘other factors’ include the
level of importance which firms attach to IFRS adoption; evaluations of the consequences
of IFRS (predominantly neutral or negative) and perceptions as to the manageability of
IFRS adoption (unexpected factors influence deferral). Adoption timing decisions of both
early and late adopters are found to be predominantly ‘dynamic’ (proactive) rather than
‘static’ (passive) activity.