Over half a decade into the adoption of IFRS 9: a systematic literature review

Isaac Selasi Awuye · Daniel Taylor

20 citations0/0 files storedJournal of Accounting Literature

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Risk Management in Financial Firms

Abstract

Purpose In 2018, the International Financial Reporting Standard 9-Financial Instruments became mandatory, effectively changing the underlying accounting principles of financial instruments. This paper systematically reviews the academic literature on the implementation effects of IFRS 9, providing a coherent picture of the state of the empirical literature on IFRS 9. Design/methodology/approach The study thrives on a systematic review approach by analyzing existing academic studies along the following three broad categories: adoption and implementation, impact on financial reporting, and risk management and provisioning. The study concludes by providing research prospects to fill the identified gaps. Findings We document data-related issues, forecasting uncertainties and the interaction of IFRS 9 with other regulatory standards as implementation challenges encountered. Also, we observe cross-country heterogeneity in reporting quality. Furthermore, contrary to pre-implementation expectations, we find improvement in risk management. This suggests that despite the complexities of the new regulatory standard on financial instruments, it appears to be more successful in achieving the intended objective of enhancing better market discipline and transparency rather than being a regulatory overreach. Originality/value As the literature on IFRS 9 is burgeoning, we provide state-of-the-art guidance and direction for researchers with a keen interest in the economic significance and implications of IFRS 9 adoption. The study identifies gaps in the literature that require further research, specifically, IFRS 9 adoption and firm’s hedging activities, IFRS 9 implications on non-financial firms. Lastly, existing studies are mostly focused on Europe and underscore the need for more research in under-researched jurisdictions, particularly in Asia and Africa. Also, to standard setters, policymakers and practitioners, we provide some insight to aid the formulation and application of standards.

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References

1991Earnings Management During Import Relief Investigations 2000Investor protection and corporate governance 1999A Review of the Earnings Management Literature and Its Implications for Standard Setting 2008Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes-Oxley Periods 2008International Accounting Standards and Accounting Quality 2001Essays on disclosure 2004Costs of Equity and Earnings Attributes 2000Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators

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