The Impact of Adopting IFRS on Accounting Quality in Saudi

Abstract

Much research has been instigated to study the impact of adopting International Financial Reporting Standards (IFRS) on accounting quality. Prior research over several countries finds contradictory results regarding IFRS effect on accounting quality. These differences in results could be attributable to the different institutional factors between countries that affect IFRS adoption and implementation. Saudi has special legal and cultural environment with great impact of Sharia on local environment. This special characteristic in Saudi may affect the implementation and usefulness of IFRS. Following Barth et al (2008), this research aims to examine the impact of applying IFRS in Saudi on accounting quality by using earnings management metrics and timely loss recognition metric to test accounting quality. Results show that earnings management decreases and timely loss recognition increases after the adoption of IFRS. These results indicate that accounting quality improves in Saudi after the transition from Saudi GAAP to IFRS.