Costs-benefits of adoption of IFRSs in countries with different harmonization histories

Purpose - The objective of this study is to compare the costs to financial statement prepares of making the transition to International Financial Reporting Standards (IFRSs) relative to the benefits to financial statement users from receiving "higher quality" IFRS-based information (measured as incremental value-relevance for listed companies in the UK, Hong Kong and Singapore). These countries had different approaches to harmonization leading up to IFRS adoption.Design methodology approach - This study is based on secondary data from financial statements and share market databases for a sample of 150 randomly selected listed companies in three countries for the year of first-time adoption of IFRSs.Findings - Results show that the extent and cost of adjustments to financial statements of UK companies at first-time adoption of IFRSs is greater than companies in Hong Kong and, in turn, Singapore. But, in each of the three countries, financial statements prepared under IFRSs generate insignificant benefits to users in terms of providing incrementally more value-relevant information than financial statements prepared under local generally accepted reporting practices. The self-develop-then-harmonize strategy of the UK's Accounting Standards Board caused companies to incur higher costs-to-benefits on adoption of IFRSs than the selective-importing-of International Accounting Standards strategy in Hong Kong and Singapore.Originality value - The evidence enables a retrospective evaluation of historically different national standards setting strategies in terms of the cost-benefit outcomes at time of adoption of IFRSs.