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1. Introduction
The rate of IFRS adoption is astonishing especially as Internationally uniform accounting rules are a leap of faith, untested by experience or by a significant body of academic
result, nor other observable alternatives Ball, 2006. IFRS has been adopted by more than 122 jurisdictions, nevertheless the level of IFRS adoption is not as clear as black and white but
more of shades of grey Pacter, 2014. Currently IFRS is adopted by countries with different endorsement mechanisms; however most of the case studies of IFRS adoption country are too
focus in explaining the reasons for the adoption or the impact of the adoption to the socio- economic of the country. Case studies of IFRS adoption in developing and ex-socialist
countries are significantly omnipresent compare the case studies of developed countries. Some case studies of IFRS adoption in developing countries for example are the case of Bangladesh,
Pakistan, Egypt, Kazakhstan, Romania and Zimbabwe Mir and Rahaman, 2005, Junaid and Ghani, 2005, Tyrrall et al., 2007, Albu et al., 2011, Hassan, 2008, Hussey and Ong, 2006,
Chamisa, 2000. At the moment there are few explanations of why IFRS is diffused. The first common
explanation for IFRS diffusion is the realist perspectives. IFRS is diffused through capital dependency and as the new technological tools for developed countries in dominating the
developing countries Aras and Crowther, 2008, Nnadi, 2012, Bakre, 2008. The second explanation, IFRS as well as other international standards are diffused due to the
financialization of the world, especially after Asian Crisis in 1998 Arnold, 2012, Humphrey et al., 2009, Humphrey and Loft, 2009. The third explanation why IFRS diffused is simply
because countries isomorph, the institutional isomorphism became popular explanation for various case studies of IFRS adoption and has been utilized in qualitative case studies for
countries as well as companies. Astonishingly, the various streams of literatures rarely make reference one another.
Those analyzing the IFRS diffusion in the world level usually accentuate the transnational organization interplay and how international organizations improve the standard legitimacy
and precipitate the diffusion. Often they neglect the process inside the countries as an important institutional works for the whole diffusion process. In contrast, country case studies are caught
up in to too much details of why country adopt IFRS and do not perceive the country as a relevant player in the international arena.
The extant literature provides us with the snapshots from various case studies of why countries adopt IFRS and snapshots how IFRS diffused from the world-analysis papers but
they rarely relate to each other. This study would be the important missing link. By
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investigating the IFRS adoption process in several countries, this study aim to extend the world- level analysis paper of how IFRS globally diffused to the end of the diffusion pathway: the
adoption countries. This study is interested to investigate the actors who influence the adoption of IFRS at the national level and if they have resemblence with their international key actors.
The rest of paper is structured as follows: The next section provides a background of how IFRS diffused over the last three decades; the third section presents the theoretical
framework and literature review and the fourth section explain the methodology used in selecting sample countries and methodology for data collection and analysis. The fifth section
of empirical finding analyses the actors involved in the IFRS adoption process in six sampled countries. The paper then discusses the case study of the Philippines to highlight the role of
rule enabler. The paper concludes with the discussion and conclusion how this study has improved our understanding of global standardization process.
2.Important Milestones of IFRS Diffusion 1998-2008
There are many factors contribute to the IFRS diffusion over the past fifteen years. Major milestones include the Asian financial crisis in mid 1990s, the adoption of IFRS by
European Union in 2005 and the US SEC decision in 2007 to accept IFRS based financial report for foreign private issuer in the US.
Although the idea of global accounting standard has been developed since the inception of IASC, however it was not until severe financial crisis in Asia that the international agencies
believe that a global accounting standard was urgently necessary. The importance of Asian financial crisis in mid 1990s as the starting point of the new financial infrastructure regime,
thus the demand for a better global accounting standard, has been highlighted in some of studies Arnold, 2012, Humphrey et al., 2009
The Asian financial crisis began in Thailand in 1997 with the devaluation of Thai Baht due to short term investors speculation. The crisis spread very fast to the neighbouring countries
with weak currencies such as Philippines, Indonesia and Korea. The Asian financial crisis soon became a global crisis as it also impacted US hedge fund, the Russian debt crisis in 1998 and
Brazilian currency crisis in 1999. Several countries like Thailand, Indonesia and Korea did not have a choice but to welcome IMF rescue programs Arnold, 2012.
The seriousness and the scale of the crisis led to widespread consensus among western economies, world policy analyst, politician and finance ministers on the need to reform the
international financial system, thus G-7 was established in October 1998. G-7 or Group of 7
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are the group of finance ministers and central bank governors of seven developed countries: Canada, France, Germany, Italy, Japan, the UK and the US.
Four months after the October meeting, G-7 Finance Ministers and Central Bank Governors agreed to create another forum, Financial Stability Forum FSF, to promote
information exchange and coordination among national authorities, international institutions, and international regulatory experts. G-7 countries in their declaration on 30 October 1998 has
taken numerous measures to be taken included the call on the IASC to finalise by early 1999 a proposal for a full range of internationally agreed accounting standards. IOSCO, IAIS
International Association of Insurance Supervisors, and the Basel Committee should complete a timely review of the standards. Although IASC had established contacts with Basel
Committee and the World Bank for many years before, this declaration nevertheless was an important enhancement of the IASC stature in the international financial arena Camfferman
and Zeff, 2007. FSF then conducted several meetings to discuss set of standards for the new financial
infrastructure. By September 1999, this forum of finance minister and central bank governors has expanded into 20 countries which then famous for the name of G-20. On March 2000 the
Forum agreed to focus attention on 12 key international standards.. Although this list does not endow any of the additional authority of the key standards, it was a clear signal that the IASC
was now taken seriously at the governmental level in the developed world Camfferman and Zeff, 2007. The international support for IFRS was also strengthen by IOSCO endorsement in
May 20 00 for IASC’s core standards and Basel Committee in April 2000 for 15 IASC’s
standards that had a significant effect on banks. G20 recommendations become an influential factor for its member to adopt IFRS and
also for IASB to revise its standard. For example G20 successfully pressured IASB to revise its financial instrument standards after the global financial crisis in 2008 Bengtsson,
2011 .During its second summit in London April 2009, G20 issued a leader’s statement with
29 recommendations to its country members. One of the recommendations was to strengthen financial supervision and regulation was the adoption of IFRS.
The Asian financial crisis has created the new financial infrastructure globally. The crisis form new international actors which remain influential to the IFRS making at the
moment. The rise of G7 which then evolve in to G20, the creation of 12 key standards and the FSAPROSC Program by IMF-World Bank fostered the IFRS diffusion, especially to the Asian
jurisdictions. However, after the Asian financial crisis, the world observed the audacious
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decision by Europe in adopting IFRS as an accounting standard which united European capital markets.
The decision to adopt IFRS by Europe Commission in 2002, to the surprise of most, is a major drive for IFRS diffusion to other part of the world. Technically, the EU maintains an
independent process to evaluate each IFRS by its advisory group called EFRAG European Financial Reporting Advisory Group which was established in 2001. Due to modifications
that can emerge in the process, the EU-version of IFRS is not identical to the issued by the IASB. Still, the adoption of all IAS standards was a surprise even to IASCIASB member at
that time.
1
The “European Effect” pushed other country to consider similar strategic move. In July 2002 for example, Australia announced the adoption of IFRS by 1 January 2005 and the EC
decision was a major push factor
2
. Beside Australia, Japan decision to harmonise with IFRS was also highly influenced by EC decision. CESR Committee of European Securities
Regulators advice on July 2005 was the major contribution to push for BAC and ASBJ
3
to sign Tokyo Agreement with IASB in 2007. When EU adopted IFRS in 2005, CESR made an
assessment of Japanese GAAP and concluded that there were 26 area differences between J- GAAP and IFRS. CESR considered J-GAAP is not equivalent to IFRS and this brought concern
for Japanese companies listed in European marketKaneko and Tarca, 2008. IFRS harmonization attempts in Japan emerged from the pressure to convince the EU that Japanese
GAAP was equivalent to IFRS since Japanese companies rely heavily on European capital markets for external financing Skinner, 2008.
Apart from Asian financial crisis and Europe adoption, other important milestone in the IFRS world diffusion was the decision of US SEC in November 2007 to exempt foreign listed
companies reconcile to US GAAP if they used IFRS as issued by IASB as the basis of their financial reporting. When SEC issued a “Roadmap to Convergence” in 2005 in collaboration
with the European Commission, the elimination of SEC’s 20-F reconciliation for foreign
issuers using IFRS was aimed to be effective in 2009 Street, 2007. Thus, the swiftness of US SEC decision, from July 2007 it issued a rule proposal to drop the reconciliation to November
15, 2007, was a surprised to many even to IASB and FASB members
4
.
1
Interview with former IASB member, 23 September 2013.
2
media released by Australia Financial Reporting Council on 3 July 2002.
3
BAC is Business Advisory Council – and advisory council of Japanese FSA. ASBJ is Accounting Standard Board
of Japan.
4
Interview with former IASB member, 23 September 2013 and member of FASB, 26 September 2013.
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After 2007 decision, the prospect of the world achieving one global accounting standard was burgeoning. In August 2008, the SEC unanimously, with enthusiastic support by all of the
participating staff offices and divisions, approved a rule proposal containing a roadmap toward required adoption of IFRS by U.S.issuer. Zeff, 2012. The US SEC warm attitude toward IFRS
adoption has encouraged other countries with close economic relation to US to embrace IFRS or at least strengthen their commitment in adopting IFRS. Many countries around the globe
made commitment of IFRS adoption around 2008-2010 including Malaysia, Indonesia, Singapore, South Korea, Japan and Brazil.
3. IFRS adoption process: The value of an institutional perspective and the key actors.
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