In comparison with earlier surveys of research into the effects of IFRS adoption, the new report expressly addresses the objectives of the IAS Regulation, its scope is restricted, as far as possible, to evidence from the EU, and it excludes, as far as possible, the literature on the effects of voluntary IFRS adoption in the EU. It reviews the research for evidence in respect of transparency, comparability, the cost of capital, market liquidity, corporate investment efficiency, cross-border investment, other benefits, costs, and the financial crisis.
The report finds that there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. However, the report also states that the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. The report also notes that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries.
The report also identifies a number of challenges to IFRS. Among the challenges that apply to any set of financial reporting standards are the importance of surrounding institutions and preparers' incentives, the role of options in standards, the effects of principles-based standards, and the one-size-fits-all problem. Challenges that apply specifically to IFRS are identified as the role of fair value accounting and the priority given to the valuation role of accounting.
As the report was drawn up in response to the European Commission's consultation on the impact IFRSs in the EU, it also contains a conclusion for policy makers and the way forward:
For policy makers, the research findings summarised in this report will not end controversy on the effects of IFRS adoption in the EU, but they should help to form views on what has been achieved to date and what needs to be done in the future. Perhaps the most significant point to emerge from the research is the importance of institutions and incentives. The balance of evidence suggests that the objectives of Regulation 1606/2002 have been achieved to some extent. But differing institutions and incentives mean that its effects vary from firm to firm and from country to country. [...] If the EU wishes to achieve further progress in financial reporting and to reap the benefit of these improvements, it may make most sense to look at the incentives for those involved in the financial reporting process and at the institutions that surround it [...].
The report detailing the research results is available on the ICAEW website. It can be accessed in a seven page executive summary or in the 164 page full report.