IFRS IMPLEMENTATION EFFECT FOR

ISLAMIC ACCOUNTING STANDARDS

AND ISLAMIC FINANCIAL REPORTING

By: Ersa Tri Wahyuni,

PhD
Universitas Padjadjaran

UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

DISCLAIMER

The presentation reflects my

personal view of the subject
matters and does not represent
the view of Indonesian Financial
Accounting Standard Board
(DSAK-IAI)

UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

THE DIFFUSION OF IFRS

IFRS has been diffused to become an international standard over the past 15 years, there
are burgeoning number of empirical studies about the intended and unintended
consequences of this global regulatory change (see Brggemann et al., 2013 ; Tarca
, 2012 for an overview)
Some research provides evidence that IFRS produces better quality accounting
information compared to local GAAP (Barth et al., 2008; Horton et al., 2013;

Daske et al., 2008; Lee et al., 2008)

If companies convert from US GAAP to IFRS, accounting quality dimensions have been
found to remain unchanged (Bartov et al., 2005; Leuz, 2003) or even deteriorate (

Van der Meulen et al., 2007; Barth et al., 2012)

IFRS as a high quality standard is an important rhetoric for IFRS global rise (Beside the
lower of cost of capital)
US GAAP used to be the main reference for most countries in developing their accounting
standards before adopting IFRS
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

IFRS DIFFUSION AND ADOPTION:

WHAT DO WE KNOW SO FAR?

IFRS diffusion was highly influenced by

Asian Financial Crisis 1997 G7 FSF new financial infrastructure
EU adoption in 2005 Australia, Philippines, Hong Kong, South Africa
US SEC decision in 2007 allowing IFRS for foreign private issuers

Coercive isomorphism is a common explanation for the case of IFRS adoption

especially in developing countries.
Pressure from international donor organisations such as the World Bank, the Asian
Development Bank, the IMF and the EU had been a major cause for developing
countries to adopt IFRS, such as in the case of Bangladesh, Pakistan, Egypt,
Kazakhstan, Romania and Zimbabwe (Albu et al., 2011; Chamisa, 2000;
Hassan, 2008; Hussey and Ong, 2006 ; Junaid and Ghani, 2005 ; Mir and
Rahaman, 2005; Tyrrall et al., 2007)
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

THE DIFFUSION OF IFRS AND

ITS IMPLICATIONS
About 122 countries allowed or mandated IFRS as financial standards for their
listed companies.
IFRS has been very successful to become a global accounting standard,
despite of it is developed by a private independent organisation.
The (maybe unexpected) implication of single global of accounting standard is
the discouragement of other type of standards to evolve. Some Scholars
proposes Few global accounting standards instead of one (Walker, 2010;
Kothari)
For example in Indonesia many local accounting standards were revoked in
2009-2010 as part of IFRS convergence projects.
In IFRS adopted countries the local standard setters have diminishing
authority over their local standards. And IFRS become the only reference for
local standard-setters to develop their local accounting standards
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

IFRS USED IN ISLAMIC

COUNTRIES

Data Collection Method:

6%

10%

29%

48 Countries which has more than 50% musliem population based on World
Factbook.
IFRS jurisdictions profile from IASB website
Iasplus.com
No Data Countries (13): Burkina Faso, Chad, Comoros, Djibouti, Guinea, Iran,
Lebanon, Libya, Mali, Mauritania, Somalia, Sudan, Tunisia

54%

No Data
Full* (1, Pakistan 3 IFRS not adopted yet)
GAAP* (1, Indonesia convergence)
For Financial Institutions or Banks Only*
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

THE USE OF IFRS BY ISLAMIC

BANKS
A study in 2014 by AOSSG Islamic Finance working group to 131 IFIs
in 31 countries revealed:

48 or 36 % asserted compliance with IFRS,

13 or 10 % asserted compliance with IFRS as adopted by a
specific jurisdiction
19 or 14 % asserted compliance with local GAAP without
differential requirements for Islamic transactions,
26 or 20% asserted compliance with local GAAP with
differential requirements for
Islamic transactions and
24 or 18% asserted compliance with AAOIFIFAS
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

CONVERGENCE OF IFRS AND

AAOIFI STANDARDS?
Since 2013, IASB created a working group for Shariah-complaints
instruments and transactions which Indonesia, Malaysia, Pakistan,
Dubai, Saudi Arabia and AAOIFI are members.
The working group hold meeting once a year to discuss various
issues. Their last meeting in April 2015 focus on the challenges of
using IFRS 9.
Henefah, Noguchi, Muda (2013) in Journal of Legal, Ethics and
Regulatory Issues suggested that there is no so much differences
between IFRS and AAOIFI standards for Sukuk, thus IFRS can be
used for comparability purposes.

UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

SHARIAH STANDARDS:
OBSTACLES FOR FULL IFRS
ADOPTION?
AAOIFI standards is becoming global standards for Shariah
transactions in IFI (Islamic Financial Institutions)
IASB may see that shariah standards is the obstacles for full IFRS
adoption in Indonesia.
Some of the questions raised by IASB members to me during their
last visit in Jakarta.

Can IFI, for reporting purpose only, use IFRS?

If Saudi Arabia can adopt IFRS fully, why not Indonesia?
If Islamic Banks in many countries can use IFRS for their
reporting, why not in Indonesia?
UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

THE FUTURE OF SHARIAH

STANDARDS
For any standard to become a global standard, it needs input
legitimacy and output legitimacy.
Standard making, especially at the International level, requires
technical expertise, inclusive but good due process and funding for
lobby. AAOFI needs a FACE for PR purposes just like Sir David
Tweedie was a face of IFRS for 10 years.
AAOIFI need to have a serious PR efforts to market its standards
and policies outside the Islamic countries

UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

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THANK YOU
Ersa Tri Wahyuni can be contacted at
ersa@unpad.ac.id
ersawahyuni@gmail.com
Twitter : @ErsaTriWahyuni
Blog: etw-accountant.com

UNAIR INTERNATIONAL SEMINAR 9 AUGUST 2016

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