Many governments across the world have moved to mandating International Financial Reporting Standards (IFRS) as their national accounting standards. Other governments are either in the planning stage of doing so or are actively considering adopting IFRS. Typically, this is either as a blanket adoption of IFRS standards, or as a piecemeal and progressive alignment between local and international standards. Advocates of these reporting standards claim that using IFRS will make financial reports more consistent and comparable, both nationally and across borders, due to the use of what has been described as ‘the same financial language.’ This is expected to lead to more valuable information for stakeholders and lower costs of capital. However, such results are contingent on the standards being implemented in the same way, in all jurisdictions where they are adopted, which is not necessarily the case. This thesis seeks to identify why this might be the case from accountants in the 14 Asian countries included in this research; such information from accountants in these countries has never been sought before.

IFRS are said to be based on principles rather than rules, meaning that the focus when deciding on transactions and reporting should be on the substance, not the form, of the transaction. This focus is said to provide the necessary flexibility needed to cover a multitude of business practices, circumstances, and contingencies. This flexibility requires determining the substance of a transaction, which may not be straightforward, and then making decisions about how to report on it.

Most research on IFRS implementation is based in Western countries. Far less has been conducted in Asian countries, with even less dealing directly with Asian accountants. While some research has identified positive outcomes associated with the improved quality of reporting using IFRS, other research has found the opposite. The extant research predominantly uses quantitative data derived from financial reports, and studies a specific area; for example, using reported revenue to describe earnings management practices. While some research uses interview questionnaires, surveys, and Likert scales, almost no research seeks data direct from accountants in an unstructured way in order to more fully understand their perspective. What is missing from the extant literature is research which focuses specifically on understanding the perspectives of accountants tasked with actually using IFRS when making accounting and reporting choices, and in particular, what they see as barriers to high-quality financial reporting. My research begins the processing of addressing this omission.

The notion of culture and its impact on people’s behaviour is not new. Accountants are, of course, ‘people’ and are also impacted by their local culture. It is reasonable to consider that culture will have an impact upon the choices accountants make when using IFRS. It is even more likely that culture will influence accounting and reporting choices when more judgements and interpretation are required, such as with the assessment of ‘fair value.’ While literature on culture and its impact on accounting exists, the volume of this research is significantly less than that directly on IFRS. National culture has been reported to impact upon accounting choices and not necessarily in a way that is consistent with IFRS expectations. Some literature has discussed cultural issues, such as guanxi, a cultural trait present in Confucianist societies that is said to undermine the idea of an arms-length transaction, and therefore of a fair value assessment.

In this research, I interviewed 43 accountants in 14 Asian countries: China, Hong Kong, India, Indonesia, Japan, Malaysia, Myanmar, Pakistan, the Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam. I used a semi-structured interview schedule and interviewees could deviate from this if they wished, enabling what they saw as the most pressing issues to come to the fore.

I used thematic analysis to analyse the interviews, identifying 16 overarching themes. While a country may not be represented in a theme, this does not mean that this theme is not an issue for accountants there. Instead, it may be that interviewees found other issues even more challenging and worthy of discussions. The identified themes are outlined below:

1. Cultural elements, including hierarchy and age, are a major factor affecting accounting and reporting choices. Interviewees described the impact of cultural expectations on their personal and professional lives. Cultural drivers typically override the expectations that may be present in IFRS. Hierarchy is strong in almost all of these countries meaning that accountants find it difficult to make independent and autonomous accounting choices (absent from this theme: Singapore).

2. Accountants find that the flexibility in IFRS means that reporting is inconsistent and unreliable. A lack of clarity inherent in the principles-based system means that there are too many options and too many methods, and a lack of true understanding of the expected outcome (absent from this theme: Hong Kong and Pakistan).

3. Corruption practices perceived by the interviewees as inherent within their country, their government, and organisation mean that accounting and reporting with IFRS is deprioritised. The inherent flexibility in IFRS is even seen to enable poor practice. If corruption is rife, then the notion of high-quality accounting seems irrelevant. In some cases, what is viewed as corruption though a Western lens is seen as acceptable business practice (absent from this theme: Hong Kong and Singapore).

4. Lack of management support for accounting with IFRS means accountants do not feel empowered to advocate for high-quality accounting. Management may have other objectives and use IFRS to further those objectives, rather than use it for good reporting. Accountants are required to obey, especially in those countries where there are few labour protections (absent from this theme: Philippines, Singapore, and Taiwan).

5. Accounting education and professional development is seen as low quality and difficult to access. Providers of education are seen to use it as a profit-making tool and employers are reluctant to invest in accounting education. Accountants use peers to acquire new information and/or clarify information (absent from this theme: Japan, Pakistan, Singapore, and Taiwan).

6. Fair value is complex and, therefore, inconsistent and unreliable. Accountants believe that the lack of market prices in some instances means that there is no true consistency when it comes to fair value assessment, meaning the resulting values are unreliable. Some interviewees also believe that fair value assessment will be abused by management to present false figures (absent from this theme: Hong Kong and Singapore).

7. Revenue recognition requirements within the IFRS are too different from local GAAP and hard to implement well. In particular, interviewees mentioned the difficulty with complex construction contracts, and the timing of revenue reporting (absent from this theme: Hong Kong, Indonesia, Japan, and Vietnam).

8. Auditing and the audit sector in general are not seen to be supportive of accountants. Rather, they are seen to use education for profit-making purposes, kow-towing to clients, and even participate in corrupt practices (absent from this theme: Hong Kong, Japan, Pakistan, Singapore, and Taiwan).

9. The workload and cost involved in implementing and reporting using the IFRS is not worth the resulting benefits, if any (absent from this theme: Hong Kong, Indonesia, Japan, Malaysia, Myanmar, and Singapore).

10. The Government is not seen to be interested in supporting, regulating, or enforcing the IFRS. For accountants, this means that high-quality IFRS reporting is either even harder to do well or that it does not need to be prioritised at all (included in this theme: Indonesia, Malaysia, Myanmar, and Vietnam).

11. As English is not the native language of the countries examined in this research, IFRS becomes even more difficult to understand. Direct translations are not always useful, and the language can be too technical (included in this theme: Japan, Philippines, South Korea, and Thailand).

12. Relationships are more important than, and will be prioritised over, high-quality accounting, as they can affect employment, promotions, pay rises, and other issues impacting an accountant’s quality of life (included in this theme: India, Malaysia, Philippines, and Vietnam).

13. The International Accounting Standards Board (IASB) does not understand local business requirements when setting standards and, therefore, has not taken those requirements into account (included in this theme: China, India, and Vietnam).

14. The plethora of bureaucratic bodies across multiple provinces, including tax authorities, education bodies, and regulatory authorities, make things too complex (included in this theme: China and India).

15. The government is interested in supporting high-quality IFRS reporting through good education, regulation, and enforcement practices (included in this theme: Hong Kong, Singapore, South Korea, and Taiwan).

16. Overall, IFRS and fair value are a good set of reporting standards for the country, providing better information on organisational value (included in this theme: Hong Kong, Singapore, South Korea, and Taiwan).

In summary, within the 14 countries in this research, most interviewees identified multiple challenges associated with the process of implementing, or using, IFRS when undertaking accounting and reporting activities. While these challenges are not easily addressed, they cannot be ignored. In particular, the impact and influence of local culture on accountants is unlikely to change, and other issues such as corruption and a lack of education will require significant political will and expenditure. The findings of this research offer a truer understanding of what these accountants individually believe about how their choices and decision making are impacted and influenced. As a result of these issues, it is unclear whether any mandated standards, standard settings, and other accounting and reporting policies will be properly implemented, and what mitigating factors may need to be in place. Indeed, when set against the Stakeholder Perceptions model, the value of the new IFRS system is perceived to be low, meaning that the likelihood of this project’s success in these countries is also low.

This research contributes to the extant literature by bringing to the fore, for the first time, what accountants in these 14 countries, who are tasked with using IFRS, face in their decision-making processes, and what factors are likely to influence that process. It also highlights the various issues that accountants find the most difficult in using IFRS and exposes disparities or where the expectations of IFRS reporting are unlikely to meet the practice of IFRS reporting. This new knowledge can be used to inform standard setters, policy makers, accounting bodies, and critics when considering the formulation and implementation of new accounting and reporting standards and the issues that must be considered if implementation of the standards is to be successful.