An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Kim M. Shima
University of Hawaii Manoa

Abstract: The decision to adopt IFRS provides a unique opportunity to test factors that contribute to differences in financial reporting systems. This paper examines a comprehensive set of environmental characteristics based on Choi and Meek’s (2005) framework that explains the adoption of IFRS on a countrywide basis. The main finding indicates that factors relating to political and economic ties with other countries, i.e. globalization factors, and need for capital investment positively influence adoption. Interestingly, greater reliance on equity financing decreased the likelihood of adoption. These results indicate that countries accommodate globalization forces and foster internal investment by adopting. However, current IFRS may not offer the level of disclosure required by countries with large capital markets.

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