Voluntary adoption of international financial reporting standards in private firms: The German case

This paper aims to investigate the incentives of German private firms to adopt IFRS voluntarily. Financial statements prepared according to IFRS compared with German GAAP provide readers with higher quality information since managerial discretion in using accounting method choices is restricted and additional disclosures are required under IFRS. Related research based on public companies reports many motivations why firms choose to apply IFRS instead of local GAAP. These public companies switch to IFRS for instance to lower the political costs, to facilitate the monitoring role of stakeholders or to respond to external pressures related to external contracting. Our paper confirms to a large extent these findings in our sample of German private companies. Political costs and pressures from outside stakeholders are the main drivers for German private firms to apply IFRS.