Global Harmonization of Accounting Standards: Lessons Learned from Australia Equivalents to International Financial Reporting Standards (AIFRS)

Many countries entered a dramatic new era of financial reporting with the adoption of the International Financial Reporting Standards (IFRS), effective January 1, 2005. This paper provides a review of the literature on the adoption of different Generally Accepted Accounting Principles (GAAP). It thus provides background and guidance for researchers studying the change in accounting quality following widespread IFRS adoption in Australia. No country’s national standard-setting arrangements are likely to be subject to political pressure identical to that of Australia. This study has examined the impact of group accounting arising from IFRS adoption in Australia. The study has found that the adoption of IFRS has a systematic impact on financial results, notably a significant increase in reported profits and decrease reported in equity compared to local GAAP. It has also found that the audit fees increased over the period from 2004 to 2006. It is argued that cross country differences in accounting quality are likely to remain following the adoption of IFRS because accounting quality is a function of a firm’s overall institutional setting.