Abstract

This study focuses on practicing accountants in Saudi Arabia to examine their readiness to adopt the mandatory International Financial Reporting Standards (IFRS). More specifically, it investigates the International Accounting Standard for Inventories, an indicator for accountants’ understanding of IFRS requirements. To do so, we conduct an online questionnaire survey, which reveals that 52.27% accountants may not be ready for IFRS implementation. The lack of knowledge about certain IAS 2 requirements raises further concerns about accountants’ readiness to implement more complicated IFRS, some of which have no comparable local financial accounting standards. These findings draw attention to the effectiveness of IFRS training courses. Further, 57.20% accountants, all of whom reviewed the Saudi Organization for Certified Public Accountants’ (SOCPA) website, provided appropriate answers, indicating SOCPA’s significant contribution toward the spreading of awareness and knowledge about IFRS. Our findings have implications for practitioners and accounting regulators as well as bodies responsible for standardizing accounting practices in Saudi Arabia. In particular, they suggest steps necessary to increase accountants’ readiness for IFRS adoption, which became mandatory since January 1, 2017, for all listed companies. In conclusion, this study serves as a foundation for future research on the topic, which can be extended to the realm of auditors, and obstacles confronting accountants in IFRS implementation.

Keywords: International Financial Reporting Standards, IFRS adoption, Readiness, Inventories, Practicing accountants, Accounting knowledge.

JEL Classification: F36, F69, H83, M41, M42, O47.

Cite as: Ali Al-Mousa, M., Al-Adeem, Kh. (2017). Empirically Investigating Saudi Arabian Accountants` Readiness to Implement IAS 2. Financial Markets, Institutions and Risks, 1(3), 5-21. DOI: 10.21272/fmir.1(3).5-21.2017

References

1. Abutayeh, Suliman, (2013). The Project of Developing International Accounting Standards: Reviewing the International Accounting standards of Inventories (IAS 2). Unpublished Report Submitted to Saudi Organization for Certified Public Accountants (SOCPA).
2. Agyei-Mensah, B. K. (2013). Adoption of international financial reporting standards (IFRS) in Ghana and the quality of financial statement disclosures. International Journal of Accounting and Financial Reporting, 3(2): 269-286.
3. 3. Al-Adeem, K. (2015). The extent to which International Financial Accounting Standards as an international product fits in harmony with local communities: evidence from accounting research. A paper presented at the 9th forum for the Gulf Cooperative Council for Accounting and Auditing Organization (GCCAAO). Bahrain, Manama. 6-7/5/2015.Available:http://www.gccaaoforum.org/photoGa lary /comp/% D8%A7% D9%88%D8%B1%D8%A7%D9%82%20%D8%B9%D9%85%D9%84%20%D9%85%209/Dr.%20Khalid%20AlAdeem.pdf
4. Al-Adeem, K. (2017). Contributions of Gulf Cooperation Council for Accounting and Auditing Organization’s (GCCAAO) Attempts Unifying Accounting Practices and Standards in Enriching Accounting Thought: Analysis and Evaluation. Accounting Thought Journal. April. Volume 21. Issue: 1 part 2. pp.533-566.
5. Al-Adeem, Khalid, (2013). “The Project of Developing International Accounting Standards: International Accounting standards of Inventories (IAS 2)”. Unpublished Report Submitted to Saudi Organization for Certified Public Accountants (SOCPA).
6. Al-Adeem, K. (2017). “A need to theorize corporation: An accounting perspective.” International Journal of Accounting Research. 5(2):166.
7. Al-Adeem, Khalid R. and Fogarty, Timothy J. (2010). Accounting Theory: A Neglected Topic in Academic Accounting Research, LAP LAMBERT Academic Publishing AG & Co. KG Theodor-Heuss-Ring 26, 50668 Köln, Germany.
8. Alali, F. and Cao, L. (2010). “International financial reporting standards—credible and reliable? An overview.” Advances in Accounting, 26(1), 79-86.
9. Alali, F. A. and Foote, P. S. (2012). “The value relevance of international financial reporting standards: Empirical evidence in an emerging market.” The international journal of accounting, 47(1), 85-108.
10. Alhamoudi, R. (2017). The Ability of Accountants in Saudi to Apply the International Accounting Standard Impairment of Assets IAS 36: An Empirical Investigation. May. Unpublished Accounting Research Project for the Course “Research Project in Accounting”. College of Business Administration, King Saud University, Riyadh, Saudi Arabia.
11. Almowash, S. (2015). The Extent to which Practicing Accountants in Saudi Arabia Ready for Implementing IFRS 41: An Explanatory Study. December. Unpublished Master Accounting Research Project for the Course. College of Business Administration, King Saud University, Riyadh, Saudi Arabia.
12. Alsalamah , A. (2017). Accountants’ Readiness in Implementing IFRS13: Evidence from Saudi Arabia. May. Unpublished Master Accounting Research Project for the Course. College of Business Administration, King Saud University, Riyadh, Saudi Arabia.
13. Ball, R. (2006). “International Financial Reporting Standards (IFRS): pros and cons for investors”. Journal of Accounting and Business Research, Vol.36 No.1, pp. 5-27.
14. Barth, M. E., Landsman, W. R., and Lang, M. H. (2008). “International accounting standards and accounting quality.” Journal of Accounting Research, 46(3), 467-498.
15. Belkaoui, (1995). The Cultural Shaping of Accounting. CT, Westport: Quorum Books.
16. Bradshaw, M., Callahan, C., Ciesielski, J., Gordon, E. A., Hodder, L., Hopkins, P. E.,… and Stocken, P. (2010). Response to the SEC’s proposed rule – Roadmap for the potential use of financial statements prepared in accordance with International Financial Reporting Standards (IFRS) by US issuers. Accounting Horizons, 24(1), 117-128.
17. Buchanan, F. R. (2003). “International accounting harmonization: Developing a single world standard.” Business Horizons, 46(3), 61-70.
18. Camfferman, K. and Zeff, S.A. (2007). Financial Reporting and Global Capital Markets: A History of the IASC (1973-2000). Oxford University Press.
19. Cascino, S. and Gassen, J. (2012). “Comparability effects of mandatory IFRS adoption, SFB 649 discussion paper”, No. 2012-009 < Available via: https://www.econstor.eu/handle/10419/56682 last accessed 8/3/2017 >
20. Chatfield, M., (1977). A History of Accounting Thought (Revised edition). Huntington, NY: Robert E. Krieger Publishing Company.
21. Chua, Y. L., Cheong, C. S., and Gould, G. (2012). “The impact of mandatory IFRS adoption on accounting quality: Evidence from Australia.” Journal of International Accounting Research, 11(1), 119-146.
22. Cowan, T. K. (1968). “A pragmatic approach to accounting theory.” The Accounting Review. Jan. 43 (1): 94-100.
23. Clark, T. (1996). “Mechanisms of corporate rule.” In Jerry Mander and Edward Goldsmith (Eds). The Case Against the Global Economy and for a Turn toward the Local. CA, San Francisco: Sierra Club Books
24. Ding, Y., Jeanjean, T., and Stolowy, H. (2005). “Why do national GAAP differ from IAS? The role of culture.” The International Journal of Accounting, 40(4), 325-350.
25. DR Scott. (1929). “Conservatism in inventory valuation.” The Accounting Review. Papers and Proceedings of the Tenth Annual Meeting of the American Association of University Instructors of Accounting. 1(1):18-22.
26. Elias, N. (2012). “Discussion of the impact of mandatory IFRS adoption on accounting quality: Evidence from Australia.” Journal of International Accounting Research, 11(1), 147-154.
27. Erickson, D., Esplin, A., and Maines, L. A. (2009). “One world–One accounting.” Business horizons, 52(6), 531-537.
28. Florou, A., and Pope, P. F. (2012). “Mandatory IFRS adoption and institutional investment decisions.” The Accounting Review, 87(6), 1993-2025.
29. Gray, S. J. (1988). “Towards a theory of cultural influence on the development of accounting systems internationally.” ABACUS. 24 (1): 1-15.
30. Haas, J. (2013). “Towards a comprehensive appraisal of global accounting harmonization: About the “desirability” of IFRS–A comment on Ramanna’s ‘The international politics of IFRS harmonization’.” Accounting, Economics and Law, 3(2), 53-68.
31. Haller, A., and Wehrfritz, M. (2013). “The impact of national GAAP and accounting traditions on IFRS policy selection: evidence from Germany and the UK”. Journal of International Accounting, Auditing and Taxation, 22(1), 39-56.
32. Holder, A. D., Karim, K. E., Lin, K. J., and Woods, M. (2013), “A Content Analysis of the Comment Letters to the FASB and IASB: Accounting for Contingencies,” Advances in Accounting, Incorporating Advances in International Accounting, Vol.29, pp. 134-153.
33. Hopwood, A. G. (1987). “The archeology of accounting systems.” Accounting, Organizations and Society. 12 (3): 207-234.
34. Iatridis, G. (2010). “International Financial Reporting Standards and the quality of financial statement information.” International Review of Financial Analysis, 19 (3), 193-204.
35. International Accounting Standard Board (IASB). (2003). International Accounting Standard 1 (IAS 1), Presentation of Financial Statements.
36. International Accounting Standard Board (IASB). (2003). International Financial Reporting Standard 1 (IFRS 1), First-time Adoption of International Financial Reporting Standards.
37. Joshi, P. L., Bermser, W. G. and Al-Ajmi, J. (2008). Perceptions of accounting professionals in the adoption and implementation of a single set of global accounting standards: Evidence from Bahrain. Advances in Accounting, Incorporating Advances in International Accounting.24: 41-48.
38. Karim, R.A.A (2001). “International accounting harmonization, banking regulation, and Islamic banks.” The International Journal of Accounting 36:169–193
39. Königsgruber, R. (2010). “A political economy of accounting standard setting.” Journal of Management & Governance, 14(4), 277-295.
40. Kosarkoska, D and Mircheska, I.(2012), “The Main Process In the International Financial Reporting at the Beginning of 21st Century”. Procedia – Journal of Social and Behavioral Sciences Vol.44,pp.241-249.
41. Kotlyar, J. (2008). “The advent of the international financial reporting standards: a catalysteor changing global finance.” Journal of International Affairs, 62 (1):238-321.
42. Lehman, G. (2005). “A critical perspective on the harmonisation of accounting in a global world.” Critical Perspectives on Accounting. 16: 975-992.
43. Li, Y. (2013). “Does Mandatory IFRS Adoption Facilitate Financial Market Integration?” (January 8, 2013). CAAA Annual Conference 2013. Available at SSRN: https://ssrn.com/abstract=2197775 or http://dx.doi.org/10.2139/ssrn.2197775
44. Littleton, A. C. (1966). “Accounting Evolution to 1900.” New York, NY: Russell and Russell.
45. Madsen, P. E. (2013). “Evaluation accounting standard: a comment on Ramanna’s ‘ International politics of IFRS harmonization’.” Accounting, Economics and Law, 3(2), 77-92..
46. Merino, B. D. (1993). “An analysis of the development of accounting knowledge: A pragmatic approach.” Accounting, Organizations and Society. 18 (2/3): 163-185.
47. Monday, S. E. (2009). “IAS 16 and the Revaluation Approach: Reporting Property, Plant and Equipment at Fair Value.” University of Tennessee Honors Thesis Projects. htp://trace.tennessee.edu/utk_chanhonoproj/1297
48. Odia,. J.O and Ogiedu, K.O. (2013), “IFRS adoption: Issues, challenges and lessons for Nigeria and other adopters”. Mediterranean Journal of Social Sciences. 4(3):389-399
49. Ordelheide, D. 2004. The politics of accounting: A framework. In Leuz, C., Pfaff, D., and Hopwood, A. G. (Eds.). The Economics and Politics of Accounting: International Perspectives on Research Trend, Policy, and Practice, Oxford: Oxford University Press: 269-284.
50. Parker, P. J. L. (2014). “Financial Markets and the ACI Dealing Certificate 3I0-012” (2nd ed.). Electronically published: Lulu.com.
51. Posner, E. (2009). “Making rules for global finance: transatlantic regulatory cooperation at the turn of the millennium.” International Organization. 63:665-699
52. Posner, E. (2010). “Sequence as explanation: The international politics of accounting standards.” Review of International Political Economy.17(4)”649-664.
53. Previts, G. J. and Merino, B. D. (1998). “A History of Accountancy in the United States.” Columbus, OH: Ohio State University Press.
54. Ramanna, K. (2013). “The international politics of IFRS harmonization.” Accounting, Economics and Law, 3(2), 1-46.
55. Ramanna, K. and Sletten, E. (2009),”Why do countries adopt international financial reporting standards?” Harvard Business School Accounting & Management Unit, Working Paper No. 09-102 .
56. Saito, S. (2013). The international politics of IFRS harmonization: A Comment.” Accounting, Economics and Law, 3(2), 47-52.
57. Saudi Organization for Certified Public Accountants (SOCPA). SOCPA Project for Transition to International Accounting & Auditing Standards, available at: http://socpa.org.sa/Socpa/About-Socpa/SOCPA-Projects.aspx?lang=en-us
58. Soderstrom, N. S., and Sun, K. J. (2007). “IFRS adoption and accounting quality: a review.” European Accounting Review, 16(4), 675-702.
59. Stent, W., Bradbury, M. and Hooks, J. (2010).” IFRS in New Zealand: effects on financial statements and ratios.” Pacific Accounting Review, Vol. 22 No. 2.
60. Tinker. Tony (2004). “The Enlightenment and its discontents: Antinomies of Christianity, Islam and the calculative sciences.” Accounting, Auditing & Accountability Journal. Vol. 17 Iss: 3, pp.442 – 475
61. Tsunogaya, N. (2016). Issues affecting decisions on mandatory adoption of International Financial Reporting Standards (IFRS) in Japan. Accounting, Auditing & Accountability Journal, 29(5), 828-860.
62. Tyrrall, D., Woodward, D., and Rakhimbekova, A. (2007). The relevance of International Financial Reporting Standards to a developing country: Evidence from Kazakhstan. The international Journal of accounting, 42(1), 82-110.
63. Yilmaz, E and Gelmedi, O. (2012). Assessing international accounting harmonization using Izomorfism.” 2nd International Symposium on Sustainable Development. June 8-9 2010, Sarajevo.
64. Yip, R. W. Y. and Young, D. (2012). “Does mandatory IFRS adoption improve information comparability?”. The Accounting Review Journal. Vol. 87 No. 5, pp. 1767-1789.
65. Zéghal, D., Chtourou, S., and Sellami, Y. M. (2011). An analysis of the effect of mandatory adoption of IAS/IFRS on earnings management. Journal of International Accounting, Auditing and Taxation, 20(2), 61-72.
66. Zehri, F. and Chouaibi, J., (2013). “Adoption determinants of the International Accounting Standards IAS/IFRS by the developing countries”. Journal of Economics, Finance and Administrative Science vol.18 No.35, pp.56-62.