Akarsh Kainth

The purpose of our paper is to investigate whether any differences between International Financial Reporting Standards (IFRS) and local Generally Accepted Accounting Principles (GAAP) impact the transparency of financial reporting of non-listed companies through bankruptcy prediction. This contributes to extant research that has focused on the effects of IFRS adoption in the context of listed companies. For our investigation, we used logistic regression, well-established accounting-based predictors, and a sample of financial statements from privately held Swedish companies using IFRS, and Norwegian companies using Norwegian GAAP. The results indicate that financial statements made under IFRS may be better suited for bankruptcy prediction than those made under Norwegian GAAP. Our findings suggest that the use of IFRS could aid in increasing the informativeness of financial reports by promoting transparency and prevent managers of firms facing insolvency from engaging in creative accounting practices. Our results should, however, be applied with caution, as they may be due to the differences in characteristics across firms that are not captured by our research design. We leave this issue open to future research.

This article provides a comprehensive review of the conceptual formation and explanation within International Financial Reporting Standards (IFRS)-based financial accounting research. The mandatory adoption of IFRS by the European Union (EU) on 1 January 2005 resulted in an increase in the number of scientific articles explaining the effect of mandating IFRS on capital markets within the EU. Independently, these studies offer interesting insights; however, there have been few attempts to offer a critical analysis of the current state of the field in terms of conceptual formation and the role of theories in explanation. This paper provides a richer understanding of the scientific basis of the empirical research within this emerging field. We identify and critically assess a sample of eight relevant scholarly articles. Our findings suggest that the concepts in these articles appear to be borrowed from the mainstream accounting and finance literature and used in the form of variables. These concepts primarily play a deductive role. The nature of explanation appears to be mechanistic. We offer a discussion of our review’s findings and suggest some implications for future research.