Adoption of international financial reporting standards in developing countries (the case of ghana)

Thesis Overview

<p> </p><div><p><strong>1. &nbsp;</strong><strong>INTRODUCTION</strong></p><p><strong>1.1 Background</strong></p><p>&nbsp;</p><p>Internationalization of economic trade and globalization of businesses is on the ascendency. Consequently, financial statements prepared according to a nation‟s local accounting system may hardly meet the needs of investors, business partners, financiers and decision-makers who are conversant with international standards. Meanwhile, developing and emerging markets are the target of the world‟s leading industries that are operating in the saturated western countries. To better undertake their activities in developing countries; they must adopt international accounting standards that suit needs (Zeghal and Mhedhbi, 2006)<strong>.</strong>&nbsp;Additionally, hence foreign investment is major boost to the economies of developing countries an investor may demand vivid and comprehensible financial information – underscoring the reason why developing countries must adopt International Accounting Standards (Zeghal and Mhedhbi, 2006)<strong>.</strong></p><p>&nbsp;</p><p>To bridge the gap between accounting standards among countries, the International Accounting Standards Committee (IASC) was founded in 1973 by a group of professional accounting practitioners with an attempt to formulate a uniform and global accounting standards that would aim at reducing the discrepancies in international accounting principles and reporting practices. In this light, the International Accounting Standard (IAS) was proposed which has actively been championing the uniformity and standardization of accounting principles over two decades now (Carlson, P, 1997). Meanwhile, in April 2001, the International Accounting Standards Board (IASB) took over the setting of International Accounting Standards from the International Accounting Standard (IASC). Henceforth, the IASB updated the already existing International Accounting Standard (IAS) and referred to them as the International Financial Reporting Standards (IFRS). This study focuses on how Ghana as a typical case of a developing economy adopted the International Financial Reporting Standards.</p><p>In January, 2007, the Minister of Finance and Economic Planning – Ghana formally launched the adoption of IFRS. By December 2007, listed companies, government business enterprises, banks, insurance companies, securities brokers, pension and investment banks and public utilities are expected to prepare their financial statements in accordance with the IFRS. In an address to the participants at the launching, the minister referred to a report on Observance of Standards and Codes (ROSC) on Ghana that the world bank issued in March 2006, and noted that “the adoption of IFRS would address certain weaknesses the ROSC of Ghana has identified” (UN, 2007).</p><p>&nbsp;</p><p><strong>1.2 Research Gap and Objective of the Study</strong></p><p>&nbsp;</p><p>In recent years, the development of international accounting standards and adoption by such industrialized countries as: Britain, Germany, United States of America, Canada and the Members of the European Union have been a major of concern among accounting professionals. In spite of the numerous studies about the Adoption of International Accounting Standards by developed and industrialized countries around the world, less attention has been given to developing countries. Virtually, no articles and books about the adoption of accounting standards by developing countries and in particular Ghana exist (Zeghal and Mhedhbi, 2006). Moreover, the few that are in existence primarily focuses on whether it is necessary for developing countries to adopt international accounting standards (Tyrrall <em>et al</em>&nbsp;2007).</p><p>&nbsp;</p><p>Secondly, these articles and books discuss the impact of international accounting standards on the economic development of the various developing countries. Meanwhile, most previous studies on adoption of international accounting by developing countries are country specific. For instance an analysis of the International Accounting Standards implementation process in developing countries which took Armenia as the analytical framework” (McGee 1999).</p><p>&nbsp;</p><p>In this light therefore, this study will examine how the accounting profession has evolved in developing countries over the years – specifically Ghana Additionally, the processes and factors affecting the adoption of International Financial Reporting</p><p></p></div><h3></h3><br> <br><p></p>