IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 3 NO. 7 2017

---

Justification for IFRS in Sub-Sahara African Countries: A case of Multinational Corporations

Olaoye, Samuel A. & Aguguom, Theophilus A

---

Abstract

This paper examined the justification for International Financial Reporting Services (IFRS) in Sub-Sahara African countries. We considered multinational corporations in Sub-Sahara African countries using Nigeria, Kenya and Ghana International Financial Reporting Standards (IFRS) adoption as our sample size among Sub-Sahara African countries. A desk review research approach was adopted in this study, as journals, articles and literature related this work was reviewed. The paper found that the adoption of IFRS by the African countries has enhancement multinational corporations operating in the region consolidation of financial statement less cumbersome, easier access to capital from the capital market, tax complications among their business operations from different geographical locations easier to manage. We found that adoption of IFRS generally makes it lot easier for financial reporting harmonization and uniformity in accounting measurement and treatments, meeting more disclosure requirements and dealing with information asymmetry problems for more reporting transparency. The paper found that most multinational corporations in an attempt to reduce their tax liabilities indulge in tax manipulations, illegal transfer pricing, export under-invoicing, export smuggling, tax-based erosion, and other practices of unrecorded outflows in form of capital flights from the natural rich African countries. The paper recommends that for easy and efficient implementation of the IFRS, African countries should carefully prepare workable regulatory environment, engage in manpower training, provision of adequate resources, provide required legal and strong institutional framework and regulatory support system to tackle pre and post IFRS adoption challenges while African governments should work in blocking leaking channel and the mechanisms that fuels capital flight

keywords:

FRS, Multinational corporations, capital flight, transfer pricing, Sub-Sahara Africa

---

References:

Ajayi, S. I., & Ndikumana, L. (2015). Capital flight from Africa: Causes, effects and
policy issues. Oxford: Oxford University Press.

Akintoye, I. R. (2016). Investment decisions in the 21st century. 4th Ed. Unique Educational
Publishers, Lagos-Nigeria.

Ali L., & Hwang. (2000). “Country-specific factors related to financial reporting and the
value relevance of accounting data”, Journal of Accounting Research, 38(1), 21.

Armstrong, C. S., Barth, M. E., Jagolinzer, A. D., & Riedl, E. J. (2008). “Market reaction to
the adoption of IFRS in Europe.” Harvard Business School, Working Paper. 09-032.
http://www.hbs.edu/faculty/Publication%20Files/09-032.pdf..

Agyei-Mensah B. K. (2012). The impact of adopting International Accounting Standards in
Ghana: The extent of disclosures, and their relationship to corporate characteristics.
African Journal of Business Management 6(44), 10896-10905,
http://www.academicjournals.org/AJBM. Retrieved 31/03/2017

Awuku, A. A. (2015). IFRS Adoption: Costs and benefits for companies listed on Ghana club
Thesis submitted to the department of accounting and finance, college of arts and
social sciences. Kwame Nkrumah University of science and technology, Kumasi.

Ball, R. (2006). „IFRS: Pros and cons for investors. Accounting and Business Research
International Accounting Policy Forum 5(27).

Ball, R., Kothari, S. P., & Robin, A. (2000). The effect of international institutional factors on
properties of accounting earnings. Journal of Accounting and Economics 29(1), 40-
51.

Ball, R., A. Robin, A., & J. Wu, J. (2003). Incentives versus standards: properties of
Accounting income in four East Asian countries. Journal of Accounting and
Economics 36(1), 235-270.

Ball R., Robin, A & Wu, J. S. (2000). „Accounting standards, the institutional environment
and issuer incentives: Effect on timely loss recognition in China?, Asia-Pacific
Journal of Accounting and Economics, 17(2), 71-96.

Barbu, E. M., & Barker, C. R. (2007). Trends in research on international accounting
harmonization: The International Journal of Accounting, 42(1).

Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). "International Accounting Standards
and accounting quality.” Journal of Accounting Research 46 (3), 467-49

Boyce, J. K., & Ndikumana, L. (2012). Capital flight from Sub-Saharan African countries:
Updates 1970-2010. PERI research report. Amherst, MA. Political Economy
Research Institute.
Business-Dictionary, (2017). http://www.businessdictionary.com/definition/multinational-
corporation-MNC.html: Retrieved 10/4/2017

Chen, C.J., Ding, Y., & Xu, B., (2014). “Convergence of accounting standards and foreign
direct investment.” International Journal of Accounting, 49 (1), 53-86.

Choi, F., & Meek, G. (2011) International Accounting, 7th edition, Pearson Education.

Covrig, V, Defond, M &, M.Hung, M. (2007). Home bias, foreign mutual fund holdings, and
the voluntary adoption of International Accounting Standards. Journal of Accounting
Research, 45, 41–70.

Daske, H., Hail, L., Leuz, C. & Verdi, R. (2008). Mandatory IFRS reporting around the
World: Early evidence on the economic consequences. http://ssrn.com.

Diamond, D. (1984). Financial intermediation and delegated monitoring. Review of
Economics Studies: 393-414.

Doupnik, T. & Perera, M. (2012). International Accounting. New York, NY: McGraw-Hill.

Dow, J., & G. Gorton. (1997). Stock market efficiency and economic efficiency: is there a
connection? Journal of Finance: 1087-1129.

Efobi, U. R., Nnadi, M., Odebiyi, J., & Beecroft, I., (2014). “Do the rules attract the money?
implications of IFRS Adoption on foreign direct investment.” Journal of Accounting
and Public Policy.

Ernst &Young. (2014). International GAAP 2013 generally accepted accounting practice
under International Financial Reporting Standards.
http:// www.wileyinsightifrs.com: Retrieved 10/03/2017.

Fekete, S. (2008). Determinants of the comprehensiveness of corporate Internet reporting by
Romanian Listed Companies. Working paper presented in AMIS 2008 conference in
Buchare.

Gordon, L. A., Loeb, M. P., & Zhu, W., (2012). “The impact of IFRS adoption on Foreign Direct Investment.” Journal of Account. Public Policy, 31, 374-398.

Guenther, D., & Sun, M. K. (2004). The importance of "other information" in setting stock
prices: across-country comparison. Working paper, University of Colorado at
Boulder.

Guenther, D., & Young, D. (2000). The association between financial accounting measures
and real economic activity: a multinational study. Journal of Accounting and
Economics 29: 53-72.

Guggiola, G., (2010). “IFRS Adoption in the EU accounting harmonization and markets
efficiency: A review.” International Business and Economics Research Journal. Vol.
9(12), 99-112.
Holmstrom, B., & Tirole, J. 1993. Market liquidity and performance monitoring. Journal of
Political Economy 101, 678-709.

Hoogendoorn, M. (2004). Beleidsaspecten inzake de jaarrekening . Externe Verslaggeving in
Theorie en Praktijk, Available at: http://dare.uva.nl/record/94404.

IASB (2010). The Conceptual Framework for Financial Reporting, London

IFRS (2013). IFRS application around the world jurisdictional profile: Kenya.
http://www.ifrs.org/Use-around-the-world/Documents/Jurisdiction-profiles/Kenya
IFRS- Profile.pdf

Kim, M. S., & Yang, D .C. (2012). Factors affecting the Adoption of IFRS, International
Journal of Business, 17(3).

King?wara, R. A (2015). Effect of IFRS adoption on reporting quality in Kenya. Journal of
Business and Management (IOSR-JBM, 17(1), 82-84: www.iosrjournals.org.
Retrieved 5/04/2017.

Le Billon, P. (2011). Extractive sectors and illicit financial flows: What role for revenue
governance initiatives? Bergen, Norway: Anti-Corruption Resource Center.

Leuz, C., & Verrecchia, R. (2000). The economic consequences of increased disclosure.
Journal of Accounting Research 38 Supplement: 91-124.

Melville, A. (2014). International financial reporting. A practical guide 4th Ed. Pearson
education limited Edinburgh Gate Harlow. CM20 2JE Uk.

Ndikumana, L., Boyce, J. K., & Ndiaye, A. S. (2015). Capital flight from Africa:
Measurement and drivers. In Ajayi, S. I., & Ndikumana, L (Eds.), capital flight from
Africa: Causes, effects and policy issues (pp. 15-54).Oxford: Oxford University Press.

Nobes, C., & Parker, R. (2008). Comparative International Accounting, 10th edition, Pearson
Education.

Obazee, J. O. (2000). Current convergence efforts in accounting standard setting and
financial reporting: Lagos, Nigerian Accounting Standing Board

Odia, J. O., & Ogiedu, K. O. (2013). IFRS adoption : Issues, challenges and lessons for
Nigeria and other adopters: Mediterranean Journal of Social Sciences; MCSER
Publishing, Rome-Italy, 4(3).

Olaoye, S. A., & Aguguom, T. A. (2017). Tax base erosion and profit shifting through
transfer pricing: Evidence from Nigeria. Journal of Business Administration and
Management Sciences Research. Apex Journal International, 6(1), 9
http://www.apexjournal.org. Retrieved 5/04/2017

Omolehinwa, E., & Naiyeju, J. K. (2015). Government accounting in Nigeria: An IPSAS
approach, Pumark Publications, Lagos.
Palepu, K., Healy, P., Bernard, V., & Peek, E. (2007). Business analysis and valuation. IFRS
Edition. South-Western Cengage Learning.

PriceWaterhouseCoopers (2010). IFRS and its impact on financial reporting for the life
sciences sector, January, PWC, London, 18.

Ramos, L. M., (2010). “European accounting harmonization: Consequences of IFRS adoption on trade in goods and foreign direct investments.”
www.alde.es/encuentros/anteriores/xiiieea/trabajos/pdf/046.pdf

Roberts, C., Weetman, P., & Gordon, P. (2005). International Financial Reporting. A
comparative approach , 3th edition, Pearson Education

Rong-Ruey, D. (2006). Convergence of Taiwan?s financial accounting standards with
Inte

DOWNLOAD PDF

---

Back