Is early adoption really a choice? Evidence on IFRS from Taiwan

This paper uses a stated preference approach to determine whether Taiwanese listed firms chose to adopt IFRS early in 2012. It deploys a mixed methodology (Creswell & Plano Clark, 2011), using qualitative and quantitative analysis of semi-structured interview data, to investigate firms’ actions in practice and how they viewed the choice of IFRS (including their perceived adoption costs and benefits), Reid & Smith (2007b), Schipper (2010). Although we found wide variation in the perceived net benefits of implementing IFRS, in the event, none of the Taiwanese listed companies adopted IFRS early. To explore the reason behind this unusual situation, we examine why every company withdrew from early IFRS adoption – indeed, even at the last minute. We use a detailed case study approach. Our analysis shows this late withdrawal is due primarily to the frequent changes in regulations, and secondarily to the lack of preparation time for early adoption. We find that both financial reporting standards and the feasibility of execution are important to managers in making their decision. We conclude that: (a) policy makers should ensure feasibility of the timeline for introducing new regulations, as short-notice of changes would limit adoption; and (b) accounting authorities should avoid changing regulations too often, as this increases corporate risk, and thereby reduces incentives for early adoption. Our research also contributes to knowledge by calibrating accounting costs and benefits: showing clearly how they influence corporate choices.