IFRS Adoption and Earnings Quality in Sub-Saharan Africa

International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue VI, June 2019 | ISSN 2454–6186

IFRS Adoption and Earnings Quality in Sub-Saharan Africa

Armstrong Ephraim Awinbugri¹, Prince Gyimah², Edem Wotortsi³

¹Assistant Lecturer, Kessben University College, Adum-Ghana, Box Ks 4868
²Assistant Lecturer, University of Education, Winneba-Kumasi, Ghana
³Senior Accounting Assistant, Agogo Presbyterian Women College of Education, Ghana

Abstract: – This study perused the correlation between IFRS adoption and earnings quality of listed firms in Sub-Saharan Africa country, Ghana. The study used secondary data collected from sixteen non-financial listed firms over pre-adoption periods of IFRS (2005 and 2006) and immediate post-adoption periods of IFRS (2007 and 2008). The study used logistic regression to examine the impact of pre-and-post adoption of IFRS’s on earnings quality. The results showed that firms managed to manipulate earnings toward a positive target more frequently in the pre-IFRS adoption period than the post-adoption period, and firms recognized large losses more frequently in the post-IFRS adoption period when they occurred as compared to the pre-IFRS adoption period. The study reinforces that adoption of IFRS prevents manipulation of earnings, limits possible flexibilities and accounting choices, and provide clearer rules that signal high quality accounting information and transparency.

Keywords: International Financial Reporting Standards (IFRS), Earnings quality, Non-financial firms, Emerging markets, Ghana.

I. INTRODUCTION

The auditing environment has been subject to plethora of public backlash in recent times, especially following the collapse of Enron, Worldcometc in the USA, Parmalat in Europe and even DKM in Ghana. According to Anja (2008), several stakeholders especially investors have lost confidence and trust in financial reporting due to the corporate fraud practices by organizations. It thus becomes eminent that changes in auditing and accounting standards would build stakeholder’s confidence in financial reports and the accounting profession as a whole. Some of these changes involve the convergence of local accounting standards with international accounting standards such as the International Financial Reporting Standards (IFRSs).

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