Cultural Factors, Economic Affiliations And The Adoption Of International Financial Reporting Standards

Abstract

We examine cultural characteristics in the context of economic affiliation and the timing of IFRS adoption. Prior work identifies cultural characteristics as key factors in the development of accounting systems world-wide. Our analysis extends this literature by showing that these same factors lead to economic clusters and to the propensity for adopting a universally accepted set of accounting rules. We contribute to the literature by demonstrating that, at least in one case, cultural factors are able to predict economic affiliations. Second, we provide evidence that certain cultural characteristic are affiliated with the delay in adoption of IFRS. Our results are valuable to local as well as international accounting standard setters as they look to negotiate common ground for convergence. Our examination of the cultural aspects distinctive in adoption patterns may provide insight into what specific aspects of the IFRS must be modified to expand and accelerate convergence.