IFRS discrepancies vary by country, company.(UPDATE)

Stimulus Spending May Motivate Corruption

Tech Companies Realize Compliance Gains

Ethics Aren't Considered in Executive Pay

Sustainability Saves More Than Environment

THERE ARE CONSIDERABLE DIFFERENCES IN THE APProaches taken to implementing International Financial Reporting Standards (IFRS) by individual Western European countries and companies, according to a new accounting-related fraud study by New York-based financial research firm Audit Integrity. The riskiest countries in Western Europe, from an accounting and governance standpoint, are Greece and the Netherlands. Corporations in Luxembourg, Austria, and Switzerland demonstrate the most transparent accounting practices and best corporate governance, while European banks with large capitalizations display very aggressive accounting and poor governance standards.

[ILLUSTRATION OMITTED]

"Stakeholders in a great many European corporations have sustained significant losses over the past two years and are understandably angered by the lack of transparency," says Audit Integrity CEO Jack Zwingli. "These losses could have been prevented if they would have steered clear of corporations that were hiding losses."

Audit Integrity's study, An Objective Look at International Financial Reporting Standards, also examines whether IFRS is an acceptable alternative to U.S. Generally Accepted Accounting Principles (GAAP) for financial reporting and risk analysis. Comparing the two, the study finds that U.S. GAAP filers have greater depth of reporting, frequency of filings, and more detailed governance disclosures such as executive compensation and board composition. Conversely, IFRS has greatly improved the consistency of financial reporting in Europe.

A related academic study finds that the high-quality infrastructure already in place for GAAP would likely see little improvement from a transition to IFRS, as envisioned by the U.S. Securities and Exchange Commission's proposed road-map to convert to IFRS in the next few years. Mandatory IFRS Reporting Around the World: Early Evidence on the Economic Consequences examines the economic impact of IFRS on some of the more than 100 countries that have moved to adopt it so far.

"In countries like the United States, there may be minimal room for improvement because U.S. GAAP is already considered a high-quality accounting regime," says co-author Rodrigo Verdi of Massachusetts Institute of Technology's Sloan School of Management in Cambridge. Verdi and his colleagues found that countries gaining the most from adopting IFRS have pre-existing enforcement institutions and are significantly changing their financial reporting policy with convergence.

The Audit Integrity study can be downloaded from www.auditintegrity.com. To obtain Mandatory IFRS Reporting Around the World, visit http://papers.ssrn.com and enter "1024240" in the search term field.

ILLUSTRATIONS BY TIMOTHY COOK

Print Get the Mag Weekly Updates