The Impact of International Financial Reporting Standards (IFRS) on Earnings Management: A Review of Empirical Evidence

The International Financial Reporting Standards (IFRS), the best breed, high quality and principle based reporting standards removes many allowable accounting alternatives 15. It is therefore, consequently expected to limit the management’s discretion and lessen practices on earnings management 14. Quite the opposite, some researchers squabble, that litheness instinctive in IFRS and its fair value pre-eminence might afford greater opportunities for firms to manage earnings 17,21. It is this incongruity which incited and aggravated the conduct of this study. This study applies a desktop review to investigate the worldwide existing empirical research evidence on the impact of IFRS on earnings management post- IFRS adoption and in relation to other reporting standards and reports whether the results are indistinguishable between developed and developing economies. The findings reveal that the existing empirical crams and conclusions there on are mixed, inconsistent and difficult to generalise. This indicates the pressing need for country specific empirically tested studies of this nature. The study further, stumbles on the fact that IFRS can indistinctly benefit both developing and developed markets when coupled with appropriate effective enforcement machinery. Substantially, the results entail that IFRS is a critical determinant for quality reporting but not a ‘prima facie’ guarantor for quality reporting.