Assistance with an IASB issue
After analyzing the framework, the accountants discovered that the IASB framework had
changed its organizational setup and has evolved into an efficient and robust structure
(Botzem, 2014). The company under review followed the IASB framework and was able
to pass its audit and turn a project for the fiscal year audited. After all of the public
backlash as being an inadequate accounting framework for companies to follow, the
IASB board listened to the complaints and strengthened its structure and became one of
the most reliable accounting models to adopt for financial decision-making (Botzem,
2014).
Hansen (2011) utilized the IASB framework to determine the relationship between
lobbyists, their activity, and success. The term lobbyist defined in this article was all
parties that submitted comment letters in response to IASB exposure drafts (Hansen,
2011). The IASB exposure drafts were sent out to random companies that utilized the
IASB framework. Hansen felt that lobbying success is related to the lobbyist ability to
provide accurate financial information to the IASB. After much research, Hansen
discovered that accounting principles differ across legal and economic organizations.
Hansen demonstrated that IASB was a robust framework to utilize in an organization and
that the IASB accounting method produces accurate and reliable financial reporting when
the information used was raw and unfiltered.
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
The data for this research study were collected from lobbyist comment letters on
5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures
utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the
proforma content of the comment letters submitted. Hansen realized that reliability and
accuracy played a vital role in the information provided. Researchers agree that financial
information must be reliable to produce accurate results (Dennis, 2019). It was important
for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting
methodology reported accurate information. The financial contribution was another
measure analyzed in this framework. Hansen mirrored the IASB framework when
analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.
Although it concluded that, the lobbyist financial information was accurate and in
accordance with government regulations, Hansen could not report that this was the best
accounting framework to use. However, Hansen was able to prove from analyzing the
financial statements that following the IASB accounting method was beneficial and
profitable for the lobbyists’ organization.
Bandara & Falta (2021) discussed the importance of following the IASB
framework and providing accurate financial reporting because these factors play a key in
role in investors’ willingness to take the risk and invest in a company. Mohamed,
Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems
for small and medium-sized entities. By following the IASB framework, the audited
companies minimized their financial burdens. Bandara & Falta explained key issues
surrounding the IASB framework and requirements for the IASB’s new revenue standard.
Bandara & Falta argued that investors could benefit from relying on the IASB framework
when determining the financial risk of a company. Bandara & Falta explained how
investors utilize financial reports as an instrument to determine in which company they
will invest their money and time. Investors need data to compare resources, claims, and
performance of its investment alternatives. Bandara & Falta researched the importance of
following the IASB framework because it generates the information needed for investors
to decide when to invest, hold existing investments, and sell. Financial statements have to
be more of a communication tool rather than a compliance exercise. The IASB reflects
both the characteristics of an item and how it can be used by an entity to generate strong
cash flows.
Tokara (2015) examined two banks that applied for a loan. While Bank A’s
business model was to hold and collect the interest and principle on the loan, Bank B
bundled the loan with other loans in a securitization transaction. Tokara compared the
bank’s financials by following the IASB framework model. Bank A classified the loan at
amortized cost and Bank B measured the loan at fair value. The result would determine
which bank would be the most profitable investment for the investor. Although the loan is
measured in two different ways, the investors can compare how efficiently and effectively
management has used the loan in its business (Tokara, 2015). By utilizing the IASB
framework, the financial statements became a more useful communication tool, providing
a better basis for investors to make their choice between investing in Bank A or Bank B
(Tokara, 2015).
Crump (2015) discussed the standard leasing section of the IASB framework and
the importance of companies showing transparency when reporting these items on the
balance sheet. Crump discussed several different companies’ financial reports and the
way they record their big leasing items on their financial reports. Crump explained the
importance for organizations to reveal the liabilities of leasing items as a separate line on
their balance sheet so that each company’s financial leaders could see the actual picture of
liabilities regarding their business. Crump concluded that most companies tend to hide
their leased items in the balance sheet. Hiding a company’s leased equipment is an
unethical practice and it provides false information to investors and auditors. Unethical
reporting provides little guidance to auditors when forecasting financial risk
(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump
researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump
followed the IASB framework as a blueprint to dissect the financials of the companies to
determine if the companies were recording their lease liabilities correctly on the balance
sheet. Each company was instructed to utilize the IASB framework when recording their
lease liabilities.
Maersk Group was very supportive of changing the way the lease liabilities are
recorded (Crump, 2015). The challenge involved distinguishing the different types of
leasing structures, as they relate to the IASB framework. The Maersk Group understood
the importance of revealing its lease liabilities as a line item, as oppose to embedding the
number in other liabilities on the balance sheet. British Airways parent IAG’s leaders
were not open to changing the way they recorded their lease liabilities on the balance
sheet (Crump, 2015). IAG financials were always solid and they successfully passed their
yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope
organizational leaders felt that adopting the IASB framework for leasing items is an
unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework
would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent
of the lease value is made up of property value and only 4% of this total balance will be
on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a
separate liability on the balance sheet would do nothing for investors looking to invest in
their company.
Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to
revealing credit losses on financial reporting. The focus of this research study was to
compare each framework and how a company would benefit when reporting its losses.
The timeliness of loss recognition has changed in Europe bank financial statements post
incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The
international accounting rules have changed in terms of standards on how to report
financial instruments in financial reporting. The IASB issued a new rule on financial
instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to
report credit losses. The IFRS will allow stakeholders to require firms to assess the
creditworthiness of credit instruments and to provide a model that estimates expected
losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the
revised IFRS9 standard will allow a company to estimate and book an allowance for the
lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule
because the rule will allow investors to make better business decisions based on financial
facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to
require individuals to assess instruments for their lifetime losses from the beginning and
book the allowance immediately (Whitehouse, 2014). The analysts preferred this method
because they felt it involves less judgment, subjectivity, and likelihood for interpretation
differences (Whitehouse, 2014). The FASB revisions required more management
discussions, as oppose to relying on results from the framework such as the IFRS 9. An
analyst in this study explained that the difference between the IASB and FASB is the
recognition timing of expected losses. While the IASB framework allows companies to
estimate losses over a span of a year, the FASB framework requires individuals to record
the loss when it happens. The analyst discussed in the research study discussed the
importance of understanding both standards and the way they can affect their businesses’
reporting procedures and internal control processes (Whitehouse, 2014).
Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section
related to financial reports. Hamilton researched a transition group chosen by the FASB
chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).
Management selected the transition group, which consisted of financial preparers,
auditors, and users of financial statements across many industries, geographic locations,
and public and private companies (Hamilton, 2014). The primary agenda for the chosen
group was to address the issues related to revenue recognition of intellectual property and
purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and
determines at which point a company’s revenue on the financial statement should be
recorded as gross versus net at the time accountants record the journal entry. Management
sends the selected group to various reporting companies to research and determine where
these companies are in the revenue recognition implementation process and determine the
type of roadblocks each company encounters when following the new process (Hamilton,
2014).
The transition team received 28 common questions from the selected reporting
companies related to the new revenue recognition standard. The questions relate to
judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted
the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a
logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).
One of the purposes of the IFRS 9 is to remove some of the complexity associated with
certain accounting requirements. The IFRS leaders introduced the concept of prudence.
The purpose of prudence was to prevent companies from overstating their assets and
profits on the balance sheet. Prudence was an internal control for the IASB framework to
protect companies from committing this type of fraud. Hamilton concluded that the IASB
framework was an excellent framework to implement because the framework allows
companies to produce more accurate financial reporting.
Butler (2014) examined the IASB framework as it relates to concealing bank
losses. Butler researched bank processes and how bankers report their revenue losses on
their financial reporting documentation in Ireland, Britain, and the United States. The
banking crisis caused researchers to look closer into the financial institution market and
examine which factors resulted in the demise in some of the banks and the cause of the
problem. Two legal opinions were analyzed which related to the bank loss situation.
George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that
Ireland and Britain banks were in IASB compliance under the United Kingdom laws to
disclose losses (Butler, 2014). After Bompass had examined their financial reports, he
discovered that they were not in compliance. Martin Moore, a legal representative, found
some errors in Bompass’ findings but also felt that UK banks were not in compliance
with the IASB framework regarding the report of bank losses (Butler, 2014).
The primary focus of the IASB framework, as it relates to reporting bank losses,
was to report the revenue as transparently as possible. Transparency prevents the banks
from hiding substantial losses in other numbers on the balance sheet and income
statement. A British bank was able to hide $1.5 billion in losses by including its losses in
other financial numbers on their revenue report (Butler, 2014). This fraud and deceit
caused the bank to pay a hefty fine and later the bank closed. The IASB framework
created the standard prudence to prevent companies from hiding their losses. Investors
lose billions of dollars when banks manipulate their actual financial status. The financial
reports did not show an accurate picture of the banks’ financial position, which leads to
investors making bad decisions when investing their money. The investors involved in the
fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).
Škobić (2016) discussed accounting regulations of financial reporting related to
small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized
entities (SMEs) and found that small- and medium-sized entities should have simpler
requirements when disclosing elements of their financial reporting. The IASB has created
a financial reporting standard that meets the needs and skills of small- and medium-sized
entities with no public accountability (Škobić, 2016). Škobić researched the Republic of
Serbia throughout the study. Although the requirements differ from largesized entities,
Škobić claimed that the less complex IASB requirements for SMEs do not affect the
transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting
is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).
The primary groups of people interested in reviewing SMEs’ financial statements
are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were
interested in reviewing financial statements for SMEs in relation to large-sized entities
where these groups of individuals, in addition to shareholders, investors, among others,
consider these financial documents very important. In 2004, the Republic of Serbia
implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia
gained interest in adopting the IFRS framework for SMEs as cost savings. The
implementation reduced training cost and created favorable conditions for SMEs. The
research sample size consisted of 325 companies. The companies were categorized in
micro, small, middle, and large size. Using the modified IFRS framework for SMEs and
the large sized standard was beneficial for the micro-, small- and middle-sized entities.
Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies
implemented the European Union’s (EU) mandated IFRS using accounting traditions,
ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity
in financial reporting across the country by following the IASB framework. The
European Council mandated the use of IFRS across the EU countries; however, the EU
was not 100% certain whether this order would provide uniformity in financial reporting.
Gordon et al. (2015) researched the IASB framework and provided their observation on
the IASB structure as a conceptual framework for financial reporting. The primary focus
of Gordon et al.’s research study was to identify whether the concepts processed by the
IASB discussion paper fit into a cohesive and complete framework in a matter, which was
internally consistent (Gordon et al., 2015).
While Jaggi et al. (2016) discussed the way the social, cultural, and business
environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the
accounting process was solely affected by the financial stability of the company. Jaggi et
al. also focused on the way authors of research articles compared the old accounting
framework with the IASB framework. Jaggi et al. sought to determine if any new benefits
to adopting the new accounting framework emerged to adopt the new accounting
framework. Gordon et al. only examined the IASB framework and did not research past
accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the
EU followed accounting traditions, ownership, and governance structures to implement
the IASB framework and Gordon et al. use their knowledge to examine the IASB
framework, both Jaggi et al. and Gordon et al. concluded that transparency and
uniformity play a vital role when creating accurate financial reporting. Gordon et al. and
Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is
beneficial to the companies to continue to follow the accounting framework.
Other Supporting and Contrasting Theories
The accounting theory consists of assumptions and methodologies used in various
studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &
Fenner, 2019). The accounting theory framework minimized fraud, errors, and
misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The
