Chapter 4: International Accounting Harmonisation: Literature Review
4.6 Current issues in IFRSs- related accounting research
4.6.3 Research related to the adoption and impact of IFRSs in Greece
Several scholars have been interested in the shift in the accounting regulations and practice following the adoption of IFRSs in Greece. The research conducted has focused on the applicability of new standards, the implementation process and the preparedness of Greek companies, as well as the economic impact of IFRSs. Consistent with the research conducted internationally it is unsurprising that the majority of empirical studies on IFRSs in Greece derive from the quantitative, value-relevance school of thought. Appendix 4 summarises these studies.
4.6.3.1 Perceptions of the adoption and implementation of IFRSs in Greece: Surveys
In Greece, surveys were conducted from the early years of IFRSs adoption onward. Some of the initial studies focused on the preparedness of Greek companies to comply with IFRSs.
These surveys indicated that the majority of Greek companies listed on the ASE have not designed an adequate transition or implementation period (Grant Thornton, 2003;
Floropoulos, 2006; Apostolou & Nanopoulos, 2009; Ballas et al., 2010). The main considerations relating to the transition to IFRSs process was the high cost, lack of adequate expertise and training, lack of compliance in IAS disclosure practices and the GGAP, and a
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lack of an appropriate institutional, legislative and corporate governance framework. The degree of harmonisation was far from the desired level.
In relation to compliance to IFRSs, Caramanis and Papadakis (2008) highlighted the underlying factors and constraints that affect the compliance of firms with IFRSs and address issues related to the tax accounting system and the key accounting differences between the GGAP and IFRSs. The results of the survey indicated that the majority of respondents appeared to have a very positive view of the IFRSs in terms of comprehensibility, relevance, reliability and comparability, and that IFRSs application has improved the overall quality of financial reporting in Greece. Problems in the application of IFRSs relate to lack of timely and complete adjustments to the institutional and legal framework required for the proper application of IFRSs and too few trained business accountants and auditors.
The professional judgement inherent in the IFRSs leaves room for the manipulation of accounting numbers. The use of two accounting systems and the preparation of two separate sets of accounts, one for tax purposes, according to the Greek accounting regulation and one for financial reporting according to IFRSs, raises costs and adversely affects the comparability of financial statements; this problem arises in most EU countries (Street &
Larson, 2004). The great majority of respondents have rejected Greek accounting standards in their existing form as they follow an applicable financial reporting framework. Some key benefits of IFRSs are improvements to the internal organisation of companies, the provision of financial information that supports strategic decision making and the improved status of the company. Users believe that high-quality financial reporting under the IFRSs facilitates access to international markets and facilitates them in acquiring external financing and to have easier access to international financial markets, fostering the international character of Greek firms.
These perceptions are in line with Ballas et al. (2010), who examined the relevance of IFRSs to Greek cultural and corporate governance contexts. Aside from the major differences between the IFRSs and the GGAP, the perceived benefits from IFRSs implementation were the increased reliability and comparability of financial statements. Lack of comprehensibility and comparability was reportedly due to ‘the widely acknowledged tendency for IFRSs to sanction multiple alternative treatments’ (Bowrin, 2007, p. 29 cited in Ballas et al., 2010).
Shareholders’ trust does not appear to show a corresponding increase when there is access to IFRSs’ financial statements, although some note that adoption improves a company’s
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relationship with its national and international customers and creditors. Many respondents raise concerns about the success of supervisory authorities, as they do not always provide adequate guidelines regarding the practical application of IFRSs, thereby, providing considerable scope to entities to influence accounting results through different accounting treatments.
More recent studies have also investigated the perceptions of preparers and users regarding the objective and the qualitative characteristics of financial reporting information and the costs and benefits resulting from the application of IFRSs in Greece. Sykianakis et al., (2011) concluded that the main types of costs are personnel training costs, consultants’ fees due to preparation of two sets of accounts and costs to adjust existing information systems. In line with the findings of Caramanis and Papadakis (2008), Ballas and Tzovas (2010) and Ballas et al. (2010), the benefits ensuing from the adoption of IFRSs can be summarised as increased decision-usefulness for investors, easier access to international financial markets and the provision of useful information to companies’ managers. Finally, Tasios and Bekiaris (2012) examined the perceptions of auditors on the quality of financial statements, based on the qualitative characteristics of financial reporting information defined by the IASB in its conceptual framework. Their results show that auditors perceive the qualitative characteristics of financial reporting information as important. Nonetheless, the quality of financial reports is perceived as moderate, due to earnings management, poor corporate governance, family ownership and deviation from accounting principles.
Thus, studies that focus on the differences between the GGAP and IFRSs, highlight the more prudent, rules-based and tax-oriented nature of the accounting theory and practice applied in Greece prior to IFRSs’ adoption. The transition period entailed significant costs for companies. Main areas of concern and divergence from the appropriate implementation of IFRSs concern the degree of compliance in terms of disclosures, lack of preparedness and training. Other environmental factors include corporate governance practices and conflicts between the tax-accounting mentality of preparers, comparative to a more decision-usefulness approach. Another factor that may inhibit compliance with IFRSs is managers’ incentives to manipulate earning, especially in the valuation of assets based on fair values. Perceptions regarding the impact of IFRSs can be considered as positive, while the profits of companies were found to have increased in the first years of adoption of the new standards. However, evidence on the economic impact of IFRSs, in terms of value relevance or the quality of
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financial reporting information is mixed, failing to provide conclusive outcomes as to the standards’ positive economic impact.