Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195

Contents lists available at ScienceDirect

Advances in Accounting, incorporating Advances in

International Accounting
journal homepage: www.elsevier.com/locate/adiac

IFRS implementation in the European Union and the survival of

accounting families
Arno Forst
Kent State University, Department of Accounting, P.O. Box 5190, Kent, OH 44242-0001, United States

a r t i c l e i n f o a b s t r a c t

Available online 14 April 2014 This study examines eight IFRS implementation choices available to European Union (EU) and European
Economic Area (EEA) member countries under the EU's 2002 IAS Regulation. Great disparities in IFRS implemen-
Keywords: tation exist among the countries covered under the Regulation, including statistically signicant differences in
International Financial Reporting Standards the IFRS elections for nancial and non-nancial rms. Using hierarchical cluster analysis, a classication of EU
IFRS and EEA member countries according to similarities and differences in their IFRS implementation is developed,
IAS
which identies an IFRS antagonistic, an IFRS leaning, and an IFRS integrated group. These groupings may provide
IFRS adoption
accounting system classications
a springboard for future studies on effects of IFRS implementation differences. Following Meek and Thomas
(2004) call to study the continuing relevance of taxonomies of accounting systems in the IFRS era, the study
also provides evidence for a survival of the traditional micro-based vs. macro-uniform, strong vs. weak equity
market, and outsider vs. insider economy classications of accounting systems into the IFRS implementation de-
cisions of EU and EEA member countries. These results suggest that traditional accounting system classications
remain important in the post-IFRS era.
2014 Elsevier Ltd. All rights reserved.

1. Introduction
The European Union's (EU's) passage of Regulation No 1606/2002
of the European Parliament and of the Council of 19 July 2002 on the
application of international accounting standards1 (hereafter: the IAS
Regulation), which requires that publicly traded rms prepare their
consolidated nancial statements based on International Financial
Reporting Standards (IFRS), has been hailed as a major milestone toward
the convergence of nancial reporting internationally (Armstrong, Barth,
Jagolinzer, & Riedl, 2010). Not surprisingly, the IAS Regulation, which
applies to the twenty-seven member states of the EU,2 as well as to the
three members of the European Economic Area (EEA),3 has attracted
considerable research interest (Byard, Li, & Yu, 2011; Daske, Hail, Leuz,
& Verdi, 2008; Zeghal, Chtourou, & Fourati, 2013). One area that has re-
ceived limited attention to date is the different ways IFRS have been, and
Tel.: +1 330 672 1113.
E-mail address: aforst@kent.edu.
1
Available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2002:243:
0001:0004:EN:PDF (last accessed August 29, 2013).
2 standard followed, but also of the legal and political environment of
After the most recent expansion of the EU on January 1, 2007, the 27 EU member
countries are Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
and the United Kingdom.
3
Following an agreement with the EU, the three member countries of the EEAIceland,
Liechtenstein and Norwayare obligated to adopt all EU legislation related to the EU sin-
gle market, but in turn are allowed to participate in the EU's single market without formal
EU membership.
continue to be, implemented among the member states of the EU and
EEA (Nobes, 2008; Sellhorn & Gornik-Tomaszewski, 2006). The present
study examines cross-country differences in IFRS implementation
choices under the IAS Regulation with the goal of making two distinct
contributions. First, it introduces a classication of EU and EEA member
countries based on differences in IFRS implementation. Second, it exam-
ines the relevance of traditional accounting system classications for the
IFRS implementation choices of EU and EEA member states in order to
provide evidence for the continuing relevance of accounting classica-
tions in the IFRS era.
Differences in accounting attributes internationally are well docu-
mented, for instance, in value relevance (Ali & Hwang, 2000), conserva-
tism (Ball, Kothari, & Robin, 2000), and earnings management (Leuz,
Nanda, & Wysocki, 2003). Will these differences disappear as the mem-
ber states of the EU and EEA adopt a uniform, standardized accounting
framework? One reason why differences in accounting may continue
to exist in the IFRS era, it is argued, is cross-country differences in the
implementation of IFRS. Soderstrom and Sun (2007), for example, con-
jecture that accounting quality is not just a function of the accounting
the country in which a rm is domiciled. Accordingly, they surmise,
differences in accounting attributes are likely to persist following the
adoption of IFRS. In a similar vein, Ball (2006) voices concern that
widespread IFRS adoption will mislead investors into believing that
there is more uniformity in practice than actually is the case. Uneven
implementation of IFRS, for instance, because of differences in IFRS en-
forcement regimes, Ball cautions, will cause differences in accounting

http://dx.doi.org/10.1016/j.adiac.2014.03.006
0882-6110/ 2014 Elsevier Ltd. All rights reserved.
188 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195
quality, which are hidden under the rug of seemingly uniform
standards. While Ball (2006) calls for increased attention to IFRS imple-
mentation differences, to date no classication of countries according to
differences in IFRS implementation has been attempted.
The present study develops a taxonomy of EU and EEA countries
based on similarities in the exercise of their IFRS implementation
options.4 This research advances the studies by Sellhorn and Gornik-
Tomaszewski (2006) and Nobes (2008), which have brought to the
fore the idea that the accounting regimes of EU and EEA member states
in the IFRS era can be, and should be, grouped based on characteristics of
their IFRS implementation choices.
I further investigate the relevance of traditional accounting classi-
cations for the IFRS implementation choices of EU and EEA member
states. Meek and Thomas (2004) call for an examination of the continu-
ing importance of traditional distinctions of accounting systems upon
universal adoption of IFRS. One study addressing this question is
Nobes (2008). Nobes (2008) presents evidence that EU and EEA
member states' election to require IFRS or domestic GAAP for unconsol-
idated (single-entity) accounts is consistent with his prior (Nobes,
2008) dichotomous classication of accounting systems into Class A
(strong equity, commercially driven) and Class B (weak equity,
government driven, tax-dominated) systems.
This study extends Nobes (2008) research by examining a classica-
tion of EU and EEA member countries based on eight IFRS implementa-
tion choices. Such classication is likely to capture a given country's
disposition towards IFRS more reliably than the examination of one in-
dividual election only. Moreover, I examine the linking of earlier classi-
cations of accounting regimes to IFRS implementation choices more
comprehensively by assessing three frequently used accounting classi-
cations. In addition to the Nobes (1998, 2008) taxonomy of strong and
weak equity countries, this paper also examines the classication of
accounting systems into macro-uniform and micro-based systems
(Doupnik & Salter, 1993; Nobes, 1983), and the three-cluster categori-
zation put forward by Leuz et al. (2003) and Leuz (2010).
Signicant differences exist in the IFRS implementation elections of
EU and EEA member countries. Not only do differences exist among
countries, but also within each country, as all EU and EEA member
countries make discriminating decisions to require, permit, or not
allow the use of IFRS for certain groups of rms, or certain types of
accounts (single-entity or consolidated) only. Most notably, fourteen
of thirty EU and EEA member countries differentiate between nancial
and non-nancial rms with respect to the use of IFRS in one way or
another. These differences are statistically signicant for the treatment
of single-entity and consolidated accounts of private rms.
Agglomerative hierarchical cluster analysis of IFRS implementation
elections reveals the existence of three distinct groupings with respect
to the level of IFRS implementation: IFRS antagonistic, IFRS leaning,
and IFRS integrated countries. The cluster of IFRS antagonistic countries
comprised largely of a core group of Continental European countries
inuenced by German and French accounting practice. A second
group, which is IFRS leaning, encompasses chiey UK-inuenced and
Scandinavian countries. Primarily smaller and/or formerly communist
central and eastern European countries make up a third group of IFRS
integrated countries. Interestingly, several countries defy common
expectation, for instance, Italy and Greece, which are members of the
IFRS integrated group.
Further analyses demonstrate that the empirical categorization
of countries into IFRS antagonistic, leaning and integrated countries
is statistically signicantly associated with the accounting system
4 5
Countries' elections with respect to the single entity accounts of public rms, the sin-
gle entity accounts of private rms, and the consolidate accounts of private rms, are ex-
amined separately for nancial and non-nancial rms, thus contributing six
implementation choices. In addition, I consider countries' decision to defer, or not defer,
application of IFRS for issuers of debt only, and rms applying other GAAP due to a listing
in a non-EU country.
categorization by Doupnik and Salter (1993), Nobes (1998, 2008), and
Leuz (2010). Overall, the results provide evidenceconsistent with
Nobes (2008) and contrary to Meek and Thomas (2004) conjecture
that traditional accounting classications continue to be inuential in
the IFRS era.
The following section reviews the pertinent literature and develops
the research questions to be addressed; the third section presents data
on EU and EEA member states' exercise of implementation options
under the IAS Regulation. The empirical analysis and discussion of
results follow in section four. Section ve summarizes the ndings and
concludes with suggestions for future research.
2. Literature review and development of research questions
A large body of literature has examined cross-country differences in
social, legal, and macro-economic factors in order to establish interna-
tional accounting families that enable observed differences in accounting
practices to be explained.5 The earlier research on accounting system
classications generally derived groupings of countries from an intuitive
categorization of national environmental factors identied as the driving
forces underlying a given country's accounting system (Mueller, 1968;
Seidler, 1967). Among these earlier classication studies, Nobes (1983)
can be credited with introducing the widely used differentiation of
macro-uniform and micro-based accounting systems, which are based
on a country's legal and economic foundations. In macro-uniform
countries, accounting is subordinated to national economic policies,
whereas countries characterized as micro-based have market-oriented
economies, in which accounting is independent of government.
Later accounting classication studies, such as Nair and Frank (1980),
derive classications of countries primarily from comparative statistical
analyses of nancial reporting rules or practices. For instance, Doupnik
and Salter (1993) advanceand empirically verifyNobes (1983) conjec-
ture by deriving a classication of countries with similar accounting
practices using hierarchical cluster analysis. Their detailed nine-cluster
classication conforms at the most fundamental level to the dichotomous
structure of accounting systems proposed by Nobes (1983). Panel A of
Table 1 presents Doupnik and Salter's (1993) frequently used (Hora,
Tondkar, & McEwen, 2003; Nikkinen & Sahlstrm, 2004) categorization
of countries into micro-based and macro-uniform accounting regimes.
Nobes (1998) reformulates his earlier classication and proposes a
categorization of accounting systems based on the strength of the equity
market in each country. He argues that the prevalent nancing system
drives the function of accounting and, thereby, denes the properties
of the accounting system. His updated classication of accounting sys-
tems into strong equity, commercially driven (Class A), and a weak
equity, government driven, tax dominated (Class B) systems, closely
follows the earlier micro-based versus macro-uniform distinction, with
UK and US GAAP forming the strong equity group and French, German,
and Italian GAAP making up the weak equity group. In 2008, Nobes ex-
panded his taxonomy to include all EU member countries not included
in his earlier paper. Panel B of Table 1 displays his categorization.
Leuz et al. (2003), exploring cross-country differences in earnings
management, also emphasize the strength of a given country's equity
market and propose a grouping of countries based on investor protec-
tion, stock-market development, and ownership concentration. Using
k-means cluster analysis with three predetermined clusters, they classi-
fy countries into insider and outsider economies with strong and weak
legal enforcement. Panel C of Table 3 shows this classication as modi-
ed in Leuz (2010). In the context of IFRS, the Leuz et al. (2003) and
The literature on accounting systems classications is voluminous. Emphasis is based
in the following on those studies that are used as reference points in the following empir-
ical analyses. Nobes (2011) provides a more complete review of the accounting classica-
tion literature, incorporating much of the older literature. In addition, D'Arcy (2001)
comprehensively covers studies that have based accounting classications on cultural
and environmental factors, which have been left out here entirely for brevity.
 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195
Table 1
Prior accounting classications.
Panel A: Doupnik and Salter (1993) two-cluster solution
Micro-based
EU and EEA member countries:
Ireland, Luxembourg, Netherlands, United Kingdom
Other countries:
Australia, Bermuda, Botswana, Canada, Hong Kong, Israel, Jamaica, Malaysia, Namibia,
Netherlands Antilles, New Zealand, Nigeria, Papua New Guinea, Philippines, Singapore,
South Africa, Sri Lanka, Taiwan, Trinidad United States, Zambia, Zimbabwe
Panel B: Nobes (2008) classication
Class A (strong equity, commercially driven)
Cyprus, Denmark, Ireland, Malta, Netherlands, Norway, United Kingdom
Panel C: Leuz (2010) cluster membership of countries
Outsider economies with strong legal enforcement Insider economies with strong legal enforcement
EU and EEA member countries: EU and EEA member countries:
Ireland, United Kingdom Austria, Belgium, Denmark, Finland, France, Germany,
Netherlands, Norway, Spain, Sweden
Other countries: Other countries:
Australia, Canada, Hong Kong, Israel, Malaysia, Chile, Japan, Korea (South), Switzerland
New Zealand, Singapore, South Africa, USA
Leuz (2010) classications have been used, for instance, by Schleicher,
Tahoun, and Walker (2010), who rely on the distinction between insid-
er and outsider economies to explain differences in investment cash
ow sensitivity across member states of the EU in the post-IFRS adop-
tion period.6
The study closest to proposing an accounting system classication
based on IFRS implementation choices is Sellhorn and Gornik-
Tomaszewski (2006). Sellhorn and Gornik-Tomaszewski provide suc-
cinct qualitative information on EU and EEA member states' implemen-
tation choices under the IAS Regulation. They propose that EU member
states that exhibit an identical exercise of implementation options
should be classied into groups of like countries. However, they do
not provide quantitative analysis of the data which would yield such
hierarchical classication. Instead, they consider each of the three
implementation choices they study separately, and therefore three
separate classications are provided. To give an example, Sellhorn
and Gornik-Tomaszewski place Cyprus and Slovakia into the same
category with respect to the accounting for consolidated accounts of
private rms, because both countries require IFRS for this purpose.
However, they place Cyprus and Slovakia into different classes with
respect to the single-entity accounts of public rms, because Cyprus
requires, but Slovakia prohibits, IFRS in this context.7
As a result, the work of Sellhorn and Gornik-Tomaszewski (2006) ul-
timately does not allow one to determine if two given countries, which
6
One other notable study is D'Arcy (2001). Using a similar methodological approach as
Doupnik and Salter (1993), she analyzes nancial reporting requirements in fourteen
countries and identies three clusters of countries. Cluster one, the (primarily)
European group, comprises Austria, Belgium, Denmark, France, Germany, Japan, the
Netherlands, Spain, Sweden, Switzerland, and the United Kingdom. A second, North
American, group is made up of Canada and the United States. International accounting
standards are also identied as belonging in this group. Australia, nally, is found an out-
sider and constitutes a third cluster of its own. D'Arcy's classication is unique in that she
does not nd support for a unied Anglo-American cluster of countries. Unlike the major-
ity of accounting classications, the United Kingdom is grouped with Continental
European countries informed by German and French accounting practice, and Australia
holds an outlier position. Nobes (2004) raises the possibility that data coding issues may
be at the core of D'Arcy's (2001) unusual results.
7
The information provided in Sellhorn and Gornik-Tomaszewski (2006) is dated in this
respect. Slovakia has changed its position and now permits IFRS for the single-entity ac-
counts of public non-nancial rms and requires IFRS for the single-entity accounts of
public nancial rms (see Panels A of Tables 2 and 3). Several countries have changed their
IFRS implementation choices, and two additional countries (Bulgaria and Romania) have
joined the EU since the publication of their paper.
189
Macro-uniform
EU and EEA member countries:
Belgium, Denmark, Finland, France, Germany, Italy, Norway, Portugal, Spain, Sweden
Other countries:
Argentina, Brazil, Chile, Colombia, Costa Rica, Egypt, Japan, Korea, Liberia, Mexico, Panama,
Saudi Arabia, Thailand, United Arab Emirates
Class B (weak equity, government driven, tax-dominated)
Austria, Belgium, Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary,
Italy, Latvia, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden,
Switzerland
Insider economies with weak legal enforcement
EU and EEA member countries:
Greece, Italy, Portugal
Other countries:
Argentina, Brazil, Colombia, India, Mexico, Pakistan,
Philippines, Taiwan, Thailand
have exercised some, but not all, available implementation choices in a
similar fashion, should be considered similar or distinct with respect to
their implementation of IFRS. The present study attempts to ll this void
by developing such a classication. Whereas Sellhorn and Gornik-
Tomaszewski (2006) present three classications of EU and EEA coun-
tries based on the exercise of three implementation choices, the present
study uses eight IFRS implementation elections to develop one classi-
cation. The question of which EU and EEA countries will group together
based on similarities and differences in their IFRS implementation
choices is exploratory in nature.
RQ1: Which groups of EU and EEA member countries can be identied
based on similarities and differences in their IFRS implementa-
tion choices?
While research on accounting classications has played a prominent
role in international accounting research, it is debatable whether tradi-
tional classications of accounting systems have a future following the
universal adoption of IFRS. Cairns (1997), for example, argues that the
harmonization of accounting standards and practices taking place inter-
nationally renders historical classications of accounting regimes irrele-
vant. Nobes (2006) poses the hyperbolic question of whether the eld
of international accounting will come to an end altogether upon univer-
sal, compulsory use of IFRS. In a similar vein, Meek and Thomas (2004)
call specically to examine the continuing importance of traditional dis-
tinctions of accounting systems upon universal adoption of IFRS.
Few studies to date have examined the survival of traditional
accounting classications under IFRS. One example is Nobes (2011),
who shows that the IFRS practices of large listed rms from a number
of countries8 can be traced to the dichotomous classication of micro-
based and macro-uniform accounting systems (Nobes, 1983). Thus, ev-
idence exists that differences in accounting practice persist despite de
jure adherence to an identical set of rules (IFRS), and, moreover, that
these differences in practice are informed by earlier accounting systems
classications. An alternate way traditional accounting classications
may continue to manifest themselves is in the IFRS implementation
choices of countries. Nobes (2008) nds a statistically signicant
association between EU and EEA member states' decision to require or
8
Nobes (2011) covers Australia, France, Germany, Italy, the Netherlands, Spain,
Sweden, and the UK.
190 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195
Publicly traded companies
Consolidated IFRS mandatory for fiscal years
financial statements starting on or after 1/1/2005
Single-entity annual Option to require or permit IFRS
accounts
Fig. 1. Implementation options under the IAS regulation.
to permit IFRS for the preparation of single-entity accounts, and his
classication of strong and weak equity countries. He concludes that
accounting classications have survived into the IFRS era, and that
they are useful for predicting how countries will implement IFRS.
The current study expands on Nobes (2008) conjecture by relating a
classication, developed here, which captures EU and EEA member
countries' overall implementation of IFRS, to three traditional account-
ing taxonomies. In addition to Nobes (1998, 2008) taxonomy of strong
and weak equity countries, this paper also examines the classication
of accounting systems into macro-uniform and micro-based systems
(Doupnik & Salter, 1993; Nobes, 1983) and the three-cluster categoriza-
tion put forward by Leuz et al. (2003) and Leuz (2010).
Doupnik and Salter (1993) suggest that their hierarchies of micro-
based versus macro-uniform countries could act as a blueprint for the
future harmonization of accounting standards, arguing that harmoniza-
tion should be easier within, rather than across, families. In some re-
spects, this prediction has been proven wrong as European countries,
scattered across several branches of the accounting family tree, agreed
to follow one uniform accounting standard, IFRS. Howeverconsistent
with Doupnik and Salter's premisefull integration of IFRS, i.e., a com-
plete substitution of IFRS for domestic GAAP, may be more challenging
for macro-uniform countries, where accounting practices are closely
tied to national economic policies, than for micro-based countries,
where accounting is more independent of the government.
Based on the above conjecture, and the evidence presented by Nobes
(2008), I expect to nd an association between a comprehensive
measure of IFRS implementation elections of EU and EEA countries
and accounting classications pre-dating the proliferation of IFRS,
stated in the null form:
H1: EU and EEA member countries' IFRS implementation choices are
not independent from traditional accounting classications.
3. IFRS implementation in EU and EEA member countries
The EU's IAS Regulation requires that the consolidated nancial state-
ments of publicly traded companies be prepared in accordance with IFRS
for nancial years starting on or after January 1, 2005.9 Article 5 of the
Regulation, however, enables member states of the EU and EEA to
expand the scope of the Regulation and also to require or permit IFRS
for the consolidated accounts of private companies, or for the annual
single-entity (non-consolidated) accounts of public and private rms.
Fig. 1 displays the scope of the IAS Regulation and the areas in which
countries retain a choice of accounting system.
In all areas not directly addressed by the IAS Regulation, member
states maintain full regulatory authority and therefore have the option
to require or to permit IFRS, or, in the negative, not to allow IFRS and
9
Specically, the IAS Regulation requires covered rms to follow IAS adopted by the
EU. The EU did not transfer standard setting authority to the IASB. IFRS to be used in
the EU must be adopted through an endorsement mechanism. The endorsement criteria
require that the accounting standard under consideration (1) not be contrary to the prin-
ciples set out in the Fourth and Seventh Directive; (2) be conducive to the European public
good; and, nally, (3) meet the criteria of understandability, relevance, reliability, and
comparability required of the nancial information needed for making economic decisions
and assessing the stewardship of management (IAS Regulation, Recital 9).
Other companies
(private firms)
Option to require or permit IFRS
Option to require or permit IFRS
to continue to require domestic GAAP. Each of these implementation
options, thus, represents a choice between IFRS or domestic GAAP.
Article 8 of the IAS Regulation requires that member states report
their implementation of the existing options under the Regulation to
the European Commission. Data reported in the following are based
on the European Commission's July 2, 2012 IFRS implementation
report.10
A large number of countries distinguish between non-nancial and
nancial rms in their implementation choices.11 Accordingly, informa-
tion with respect to the exercise of implementation options is presented
separately for nancial and non-nancial rms. Table 2 provides data
for non-nancial rms; Table 3 displays the same data for nancial
rms. Panels A of Tables 2 and 3 provide information on which EU and
EEA member countries require, permit, or do not allow publicly traded
rms to prepare single-entity annual accounts in accordance with
IFRS. Similarly, Panels B and C of Tables 2 and 3 show the use of
implementation options with respect to the application of IFRS for the
consolidated annual accounts and single entity annual accounts of
private rms.
In addition to implementation options with respect to the scope of
IFRS, the IAS Regulation also provides for timing options. Specically,
Article 9 enables member states to defer application of the Regulation
until nancial years starting after January 1, 2007 for issuers of debt
securities only and/or for companies whose securities were admitted
to public trading in a non-member state and which, for that purpose,
had previously been using another internationally-accepted standard.
The latter option was introduced as a bridge measure for EU and EEA
companies that had opted to use US GAAP prior to the passage of the
IAS Regulation because their shares were cross-listed on a US stock
exchange. Table 4 summarizes the exercise of implementation options
under the transitional provisions of Article 9.
The data in Tables 2 and 3 highlight the variations in approaches to
IFRS implementation among EU and EEA member countries. For in-
stance, only four countries require, but twenty-ve countries permit,
the use of IFRS for consolidated nancial statements of private, non-
nancial rms (Table 2, Panel B). Most member states, thus, allow
private rms to decide whether or not to follow IFRS for their group
accounts, effectively passing down the option to decide to the rm
level. This approach grants maximum exibility to use IFRS instead of
domestic GAAP for private companies that for any reason prefer
market-oriented IFRS, for instance, in preparation for going public. For
the consolidated statements of private rms operating in the nancial
sector, the picture is quite different. Many more countries limit choice
for nancial rms: 14 countries require IFRS for nancial rms
10
Available at http://ec.europa.eu/internal_market/accounting/docs/ias/ias-use-of-
options_en.pdf (last accessed September 12, 2013).
11
Member states that differentiate in their implementation of IFRS in one way or anoth-
er between non-nancial and nancial rms include Belgium, Denmark, Estonia, Greece,
Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain. In
addition, some countries differentiate large and small rms (e.g., Bulgaria, Slovakia); rms
that are required to prepare consolidated statements or not (e.g., Denmark, Portugal); and
rms that are required to be audited or not (e.g., Finland, Greece). As a result, to allow for
comparisons across countries, the test case for categorizing implementation options in Ta-
bles 2 and 3 is dened as a large rm, which is required to prepare consolidated state-
ments and is audited by a public accounting rm.
 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195 191

Table 2 Table 3
Exercise of IFRS implementation choices for non-nancial rms. Exercise of IFRS implementation choices for nancial rms.

Panel A: Single entity annual accounts of publicly traded non-nancial rms Panel A: Single entity annual accounts of publicly traded nancial rms

IFRS required Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Iceland, IFRS required Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Iceland,
Italy, Latvia, Lithuania, Malta Italy, Latvia, Lithuania, Malta, Romania, Slovakia
IFRS permitted Denmark, Finland, Ireland, Liechtenstein, Luxembourg, IFRS permitted Denmark, Finland, Ireland, Liechtenstein, Luxembourg,
Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Netherlands, Norway, Poland, Portugal, Slovenia,
United Kingdom United Kingdom
IFRS not allowed Austria, Belgium, France, Germany, Hungary, Romania, IFRS not allowed Austria, Belgium, France, Germany, Hungary, Spain, Sweden
Spain, Sweden
Panel B: Consolidated nancial statements of private nancial rms
Panel B: Consolidated nancial statements of private non-nancial rms
IFRS required Belgium, Bulgaria, Cyprus, Estonia, Greece, Italy, Latvia,
IFRS required Bulgaria, Cyprus, Malta, Slovakia Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia
IFRS permitted Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, IFRS permitted Austria, Czech Republic, Denmark, Finland, France, Germany,
France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Hungary, Iceland, Ireland, Liechtenstein, Luxembourg,
Latvia, Liechtenstein, Lithuania, Luxembourg, Netherlands, Netherlands, Norway, Spain, Sweden, United Kingdom
Norway, Portugal, Romania, Slovenia, Spain, Sweden, IFRS not allowed None
United Kingdom
IFRS not allowed Poland Panel C: Single entity annual accounts of private nancial rms

IFRS required Bulgaria, Cyprus, Estonia, Greece, Italy, Latvia, Lithuania, Malta,
Panel C: Single entity annual accounts of private non-nancial rms
Romania, Slovakia, Slovenia
IFRS required Bulgaria, Cyprus, Malta IFRS permitted Denmark, Finland, Iceland, Ireland, Liechtenstein, Luxembourg,
IFRS permitted Denmark, Estonia, Finland, Greece, Iceland, Ireland, Italy, Netherlands, Norway, United Kingdom
Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, IFRS not allowed Austria, Belgium, Czech Republic France, Germany, Hungary,
Slovakia Slovenia, United Kingdom Poland, Portugal, Spain, Sweden
IFRS not allowed Austria, Belgium, Czech Republic France, Germany, Hungary,
Latvia, Poland, Portugal, Romania, Spain, Sweden

among EU and EEA member countries with respect to these two

(Table 3, Panel B) compared to only four countries requiring IFRS for options. As indicated by the largest (smallest) mean values of any of
non-nancial rms (Table 2, Panel B). In about half of the EU and EEA the IFRS implementation choices for the consolidated accounts of pri-
member countries, exibility does not trump comparability when it vate nancial rms (annual accounts of private non-nancial rms),
comes to nancial rms, most likely because of a preference for fair EU and EEA member countries as a group are most (least) likely to
value accounting for nancial rms. require IFRS for these particular contexts.
A test of difference in means between nancial and non-nancial
rms with respect to the accounting for the single entity accounts of
4. Empirical results
public rms is not signicant at conventional levels (t = 1.36, p = .18,
two-tailed). However, a signicant difference in the exercise of imple-
The data reported in Tables 2 through 4 reveal similarities and differ-
mentation options for these two groups of rms exists for the single en-
ences among EU and EEA member states' exercise of available imple-
tity (t = 2.80, p b .01, two-tailed) and consolidated accounts (t =
mentation options under the IAS Regulation. To assess which
3.61, p b .01, two-tailed) of private rms. These statistically signicant
countries exercised their IFRS implementation options in a similar fash-
differences in IFRS implementation between nancial and non-nancial
ion, all implementation choices were coded such that higher (lower)
rms lend credence to the approach of tracking accounting implementa-
numbers indicate higher (lower) levels of IFRS integration into a
tion choices separately for nancial and non-nancial rms.
country's overall accounting system.12 If a given country requires IFRS
Following the empirical approach of Doupnik and Salter (1993) and
in a certain instance, it was scored 1; if the use of IFRS is prohibited,
D'Arcy (2001), I next employ agglomerative hierarchical cluster analysis
this choice was coded 1. If a country elected to permit rms to use
to identify groupings of EU and EEA member countries based on similar-
IFRS at their discretion, this choice was coded as the midpoint, hence
ities and differences in their exercise of IFRS implementation choices.
0. For the two dichotomous variables, deferral of application or not,
The results of this analysis will provide an answer to RQ1. In agglomer-
the choice to defer was coded 1 and 0 for not using this option.13
ative hierarchical cluster analysis, each case (country) initially consti-
Table 5 provides descriptive statistics, means, medians, standard de-
tutes its own, independent cluster. Because the distance between two
viations, and ranges of EU and EEA member states' implementation
cases that are alike will be small, clusters are formed based on distances
choices under the EU's IAS Regulation. The largest (smallest) standard
between cases. Cases that display the smallest distance to each other
deviation exists with respect to the single entity accounts of private
will be merged rst to form a cluster. In each subsequent step, the
nancial rms (consolidated accounts of private non-nancial rms),
next two nearest clusters will be merged until all cases have been com-
indicating the smallest (largest) uniformity of implementation elections
bined in one universal cluster in the nal step. Results are reported
12
based on the between-group linkage measured by the squared
For purposes of robustness, I applied a variety of coding schemes. None of these alter-
native coding schemes resulted in materially different results, as long as choices
Euclidean distance.14 A dendrogram depicting the combination of coun-
expanding (limiting) IFRS were consistently coded as high (low), or vice versa. Further- tries into clusters according to their IFRS implementation decisions is
more, because not all adoption choices may be of equal economic importance, I tested cod- reproduced in Fig. 2.
ing schemes that put higher weights on some items in an ad hoc fashion. Ultimately, I The cluster analysis reveals the existence of three primary groups of
opted for a non-weighted coding scheme for its ease of interpretability and because it is
countries. A cluster of nine countries at the left of the cluster solution is
difcult to establish unequal weights justied across all countries.
13
The deferral options may be considered less important than the other implementation formed by countries that did not implement IFRS into their accounting
choices. Also, member states' ability to defer application of IFRS for certain rms expired in
2007, and thus these elections are only of historical relevance. However, use of the deferral
14
options can be considered an important culture variable, indicating countries' supportive- Various alternate measures have been used to protect against the sensitivity of the
ness of the move toward IFRS. Inclusion, or exclusion, of these two variables in the scoring cluster solution to the choice of method. Alternate distance measures employed include
scheme, however, does not alter the result materially. If the deferral options are excluded, Euclidean distance, cosine, and Minkowski, in addition to dening clusters based on the
only one country is reclassied. Slovenia moves from the IFRS leaning to the IFRS integrat- within-group linkage, furthest neighbors, centroids, and Ward's method. The results also
ed group. remain qualitatively similar by using k-means clustering instead of hierarchical clustering.
192 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195

Table 4
Deferred application of IAS regulation.

Chose to defer effective date of the IAS Regulation until 2007 Chose not to defer effective date of the IAS Regulation until 2007

Companies that only issue debt securities
Companies admitted to public trading in a
non-member state and following other
internationally accepted standard for
that purpose
Austria, Belgium, Denmark, Finland, France, Germany, Hungary,
Iceland, Ireland, Luxembourg, Norway, Poland, Romania,
Slovenia, Spain, Sweden
Austria, Belgium, France, Germany, Iceland, Luxembourg,
Norway, Romania
Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Italy, Latvia,
Liechtenstein, Lithuania, Malta, Netherlands, Portugal, Slovakia,
United Kingdom
Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain,
Sweden, United Kingdom

Table 5
Descriptive statistics of IFRS implementation option exercises.

Variable Mean Median St. dev. Min. Max. t-stats

Single entity annual accounts of publicly traded non-nancial rms 0.07 0.00 0.785 1.00 1.00
Single entity annual accounts of publicly traded nancial rms 0.17 0.00 0.791 1.00 1.00 t = 1.36
p = .18
Consolidated nancial statements of private non-nancial rms 0.1 0.00 0.403 1.00 1.00
Consolidated nancial statements of private nancial rms 0.47 0.00 0.507 0.00 1.00 t = 3.61
p b .01
Single entity annual accounts of private non-nancial rms 0.30 0.00 0.651 1.00 1.00
Single entity annual accounts of private nancial rms 0.03 0.00 0.850 1.00 1.00 t = 2.80
p b .01
Deferral for companies that only issue debt securities 0.53 1.00 0.507 0.00 1.00
Deferral for companies trading outside of the EU and EEA 0.27 0.00 0.450 0.00 1.00

Reported are the mean, median, standard deviation and range of IFRS implementation option exercises under the EU's IAS Regulation. Elections to require (permit, prohibit) IFRS in a certain
context are coded 1 (0, 1). Decisions to defer (not defer) the application of IFRS for specic groups of rms are coded 1 (0). t-statistics are for the difference in means (two-sided tests).

systems much, if at all, beyond the required scope of the IAS Regulation,
and can be considered IFRS antagonistic. Conversely, ten countries
grouped at the right side of the cluster solution display the highest
levels of IFRS implementation and can be labeled as IFRS integrated. In
between these two, a middle cluster of eleven countries emerges, com-
prised of countries that may be named IFRS leaning. These countries
have expanded the scope of IFRS to some degree.
Table 6 displays the cluster memberships of EU and EEA member
states and the mean IFRS implementation for each group.15 The mean
IFRS implementation for antagonistic (leaning, integrated) countries is
4.50 (0.55, 4.55). These values indicate that IFRS antagonistic coun-
tries tend to make implementation choice generally in the direction of
not allowing IFRS (negative scores), whereas the on average high
positive score of IFRS integrated countries indicates IFRS elections
more consistent with requiring IFRS. Results of t-tests reported in
Table 6 indicate that differences in IFRS implementation between
clusters are statistically signicant.
The group of IFRS integrated countries, which have greatly expanded
the use of IFRS beyond the limited mandate of the IAS Regulation, con-
sists primarily of smaller and formerly communist European countries.
The inclusion of Italy and Greece in this group may appear surprising,
but is based on these countries' legislative responses to the IAS Regula-
tion. Countries informed by Anglo-American accounting practice (UK
and Ireland) are not at the forefront of IFRS adoption, but included in
the IFRS leaning group. Scandinavian countries are also prominent in
this group of countries. Finally, the group of IFRS antagonistic countries,
which did not expand the use of IFRS much beyond the scope of the IAS
Regulation, is compromised largely of countries inuenced by German
and French accounting practice.
Fourteen of the countries included in this analysis are also found in
the study by Doupnik and Salter (1993), who classify ten of these coun-
tries as macro-uniform and four as micro-based (Table 1, Panel A). All
15
While this study does not use IFRS implementation scores for each countries, such
scores can be easily derived. A country that requires IFRS for all contexts, and also has
not chosen to defer the application of IFRS, will display a high score of 6, whereas a country
prohibiting IFRS for all contexts, and also opting to defer the mandatory application of IFRS
to the maximum extent, will receive a low score of 8.
countries identied as micro-based fall in the IFRS leaning group. Of
the ten macro-based countries, one is classied as IFRS integrated
(Italy) and three as IFRS leaning (Denmark, Finland, and Sweden). The
remaining countries (Belgium, France, Germany, Norway, Portugal,
and Spain) fall into the IFRS antagonistic group. Panel A of Table 7 dis-
plays a cross tabulation of the cluster results with Doupnik and Salter's
classication.
A chi-square test of independence reveals that there is a statistically
signicant relationship between the macro-uniform and micro-based dis-
tinction and IFRS implementation at the p b 0.10 level, X2 (2) =5.600,
p = 0.061.16 Results of a Fisher's exact test are similar and conrm a
signicant relationship between the two categorizations, p = 0.105.17
All but four countries (Bulgaria, Romania, Iceland, and Liechtenstein)
overlap with Nobes (2008) categorization of Class A and Class B
accounting systems (Table 1, Panel B). Table 7, Panel B, shows a cross-
tabulation of the IFRS implementation clusters and Nobes (2008) classi-
cations of countries into Class A (strong equity) and Class B (weak
equity). Class A countries are predominantly IFRS leaning, while Class B
countries are spread out across all three implementation groups, with a
dominance of IFRS antagonistic countries. A chi-square test again reveals
a statistically signicant relationship between Nobes' taxonomy of coun-
tries and a classication of countries based on IFRS implementation at
the p b 0.05 level, X2 (2) = 7.081, p = 0.029. A supplemental Fisher's
exact test also conrms a signicant relationship, p = 0.022.
Finally, fteen EU and EEA countries are also included in the classi-
cation by Leuz et al. (2003) and Leuz (2010), which is based on the
importance of the stock market for corporate nancing and the quality
of legal enforcement in each country (Table 1, Panel C). Table 7, Panel
16
The chi-square test assumes that the expected value for each cell is ve or higher, an
assumption that cannot be met given the small overlap of only 14 countries. An argument
can be made not to report chi-square tests if their results may not be valid because of small
sample size and low cell counts. However, reliance on these test statisticsdespite such
validity concernsis consistent with prior research (Nobes, 2008). The reporting of chi-
square tests thus assures comparability. To address validity concerns, I introduce a meth-
odological advance over Nobes (2008) and corroborate the reliability of the results by ad-
ditionally conducting Fisher's exact test. Fisher's exact test is neither sensitive to small
sample sizes nor to uneven or small cell counts.
17
Fisher's exact test does not provide a test statistic, but computes the p-value directly.
 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195 193

Fig. 2. Hierarchical classication of IFRS implementation choices.

C, displays a cross-tabulation with Leuz's (2010) classication. Both
overlapping countries in the outsider/strong category (Ireland and the
United Kingdom) fall in the IFRS leaning category. Insider economies
with strong legal enforcement are fairly evenly split between the IFRS
leaning/antagonistic categories and insider economies with weak legal
enforcement between the IFRS integrated and IFRS antagonistic clus-
ters. A chi-square test conrms again a statistically signicant associa-
tion between a taxonomy of countries based on IFRS implementation
choices and Leuz's classication based on the development of equity
markets and legal enforcement, X2 (4) = 12.429, p = 0.014. Fisher's
exact test conrms this result, p = 0.016.
Taken as a whole, these results provide solid evidence in support of
H1. IFRS implementation choices and traditional accounting system
classications are not independent. These ndings corroborate Nobes
(2008) conjecture that previous accounting classications can be used
to predict and explain IFRS implementation decisions. The macro-
economic, political, and legal factors which gave rise to earlier classica-
tions of accounting systems survive into the IFRS era by informing
countries' IFRS implementation choices. Specically, in areas not cov-
ered by the IAS Regulation, macro-uniform (weak-equity, insider-
economy) countries largely require domestic GAAP and therefore tend
to fall in the IFRS antagonistic group. Micro-based (strong-equity,
outsider-economy) countries by contrast, are more open to IFRS and
have a propensity to allow rms either to use domestic GAAP or IFRS
whenever the application of IFRS is not mandatory.
However, IFRS implementation choices also display remarkable
departures from these earlier categorizations, however. For instance,
the Latin block, comprised of Italy, Greece, Portugal, and Spain, identi-
ed in Nobes (2008), is split evenly between Italy and Greece in the IFRS
integrated, and Portugal and Spain in the IFRS antagonistic cluster. None
of the strong equity countries identied by Nobes or Leuz are leading
in IFRS implementation. Apart from Italy and Greece, the countries com-
prising the IFRS integrated group (Cyprus, Malta, Bulgaria, Slovakia,
Estonia, Latvia, and Lithuania) are all smaller, primarily formerly
communist countries. None of these countries can be said to have
strong, developed equity markets, yet they are leading in the imple-
mentation of market-oriented IFRS. Ramanna and Sletten (2009) and
Judge, Li, and Pinsker (2010), indeed, provide evidence that less power-
ful countries are more likely to adopt IFRS. In the case of the former
communist countries, the lack of a well-developed and entrenched
domestic accounting system, combined with the cost of such a system's
development, and the desire to attract foreign capital (Daske et al.,
2008), may also have played a role in their being at the forefront
of IFRS implementation. Consistent with these studies, observed
deviations in the association between IFRS implementation and prior
accounting system classications indicate that EU and EEA member
states' IFRS implementation choices are based on a complex set of
factors, not entirely captured by the drivers underlying the accounting
systems classications of Doupnik and Salter (1993), Nobes (2008),
and Leuz (2010).

Table 6
Cluster membership of EU and EEA member countries.

IFRS antagonistic group (Cluster 1) IFRS leaning group (Cluster 2) IFRS integrated group (Cluster 3)

Austria, Belgium, France, Germany, Hungary, Czech Republic, Denmark, Finland, Iceland, Ireland, Liechtenstein, Bulgaria, Cyprus, Estonia, Greece, Italy,
Poland, Portugal, Romania, Spain, Sweden Luxembourg, Netherlands, Norway, Slovenia, United Kingdom Latvia, Lithuania, Malta, Slovakia
Mean score = 4.50 = 0.55 = 4.55
t-tests of differences C1 vs. C2 C2 vs. C3 C1 vs. C3
between clusters t = 6.84, p b 0.001 t = 11.06, p b 0.001 t = 13.79, p b 0.001

Reported are groupings of EU and EEA member countries derived from a hierarchical cluster analysis of eight IFRS implementation choices under the EU's IAS Regulation. t-statistics are for
differences in country mean exercise of implementation options between country groupings (two-sided tests).
194 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195
Table 7
Cross-tabulation of IFRS implementation groups with other classications.
Panel A: IFRS implementation groups versus Doupnik and Salter (1993) classication
Antagonistic group
Macro-uniform Belgium, France, Germany, Norway,
Portugal, Spain
Micro-based None
Total: 6 7
Panel B: IFRS implementation groups versus Nobes (2008) classication
Antagonistic group
Strong equity, commercially driven None
Weak equity, government driven, Austria, Belgium, France, Germany, Hungary,
tax-dominated Poland, Portugal, Spain, Sweden
Total: 9 9
Panel C: IFRS implementation groups versus Leuz (2010) classication
Antagonistic group
Outsider/strong None
Insider/strong Austria, Belgium, France, Germany,
Spain, Sweden
Insider/weak Portugal
Total: 7 6
5. Summary and conclusion
The primary contribution of this research lies in the development of
a classication of the accounting systems of EU and EEA member coun-
tries, based on differences and communalities in IFRS implementation
choices. Pronounced variation exists in the level of IFRS implementation
across member states of the EU and EEA. The study highlights statistical-
ly signicant differences in the application of IFRS for nancial and
non-nancial rms. The qualitative data on the IFRS implementation
elections presented here may be of interest to practitioners or re-
searchers who may have assumed a more uniform adoption process.
The story of IFRS implementation in most member countries of the EU
and EEA is that of supplementation of domestic GAAP with IFRS for
specic uses. The implication for the ongoing debate concerning the
adoption of IFRS in the U.S. is that framing the adoption question in
terms of a substitution of accounting systems may be misspecied.
Presumably the most meaningful area for future research on the ef-
fects of IFRS implementation differences may be the differences in IFRS
implementation in the top and bottom left quadrants of Fig. 1. For the
consolidated nancial statements of public rms, all member states of
the EU and EEA must utilize IFRS. However, for the single-entity annual
accounts, IFRS or domestic GAAP may be applicable depending on each
country's implementation choice reported in Panels A of Tables 2 and 3.
Some countries require IFRS for the preparation of single-entity ac-
counts; as a result no difference between the applicable accounting
standard for the preparation of single-entity and consolidated state-
ments exists. However, if domestic GAAP is permitted, or even required,
for single-entity accounts, the potential for different outcomes is
present. While technically independent, it is likely that in countries
requiring domestic GAAP for the preparation of single-entity accounts,
but IFRS for group accounts, any judgment involved in the preparation
of consolidated statements under IFRS may be exercised in accordance
with domestic GAAP for reasons of convenience (Nobes, 2006) or to
avoid cognitive dissonance.18
18
Evidence for this conjecture is provided by Macas and Muio (2011), who nd that
the explanatory power of earnings and equity book value for stock prices, as well as the
ability of earnings to explain cash ows, is lower for rms domiciled in countries which re-
quire the preparation of single-entity annual accounts using domestic GAAP, as compared
to rms domiciled in countries where IFRS is acceptable for single-entity annual accounts.
Leaning group Integrated group Total:
Denmark, Finland, Sweden Italy 10
Ireland, Luxembourg, Netherlands, None 4
United Kingdom
1 14
Leaning group Integrated group Total:
Denmark, Ireland, Netherlands, Norway, Cyprus, Malta 7
United Kingdom
Czech Republic, Finland, Luxembourg, Estonia, Greece, Italy, Latvia, 19
Slovenia Lithuania, Slovakia
8 26
Leaning group Integrated group Total:
Ireland, United Kingdom None 2
Denmark, Finland, Netherlands, Norway None 10
None Greece, Italy 3
2 15
Using hierarchical cluster analysis, I derive a classication of EU and
EEA member countries reecting the depth of IFRS implementation in
each country's overall accounting system. The analysis reveals the exis-
tence of an IFRS antagonistic, an IFRS leaning, and an IFRS integrated
group of countries. Differences in IFRS implementation, Ball (2006) ar-
gues, constitute a possible source for persistent cross-country variation
in accounting quality, because uneven implementation of a uniform
accounting standard buries accounting inconsistencies at a deeper,
less transparent level than more readily observable differences in stan-
dards. By providing a taxonomy of EU and EEA member countries based
on a comprehensive review and analysis of cross-country differences in
IFRS implementation, this study paves the way for future work assessing
the relevance of cross-country differences in IFRS implementation on
various attributes of accounting.
Meek and Thomas (2004) and Nobes (2006, 2008) suggest examin-
ing whether universal adoption of IFRS has rendered traditional distinc-
tions of accounting systems irrelevant. This study provides evidence
that three traditional taxonomies of accounting systemswhich distin-
guish between macro-uniform and micro-based countries (Doupnik &
Salter, 1993; Nobes, 1983), strong equity, commercially driven, and
weak equity, government driven, accounting systems (Nobes, 1998,
2008), and insider and outsider economies (Leuz, 2010; Leuz et al.,
2003)continue to be important in the IFRS-era. Chi-square and
Fisher's exact tests reveal that the IFRS implementation elections of EU
and EEA member countries are not independent of these accounting
classications. A majority of EU and EEA member countries thus appear
to utilize their implementation options under the IAS Regulation consis-
tent with the economic factors and accounting traditions which gave
rise to widely-used accounting classications identied in prior work.
Clearly, the adoption of IFRS throughout the EU and EEA did not
result in a breakdown of traditional accounting families. Much to
the contrary, consistent with Nobes (2008), the evidence suggests
that traditional accounting classications permeate countries' IFRS
implementation decisions. Traditional accounting classications have
therefore not become obsolete, but remain useful to explain and predict
IFRS implementation. The limited overlap of countries with the catego-
rizations by Doupnik and Salter (1993) and Leuz (2010), however, must
be noted as a practical limitation to assessing fully the survival of these
accounting classications in the IFRS era. Moreover, the current study
only provides a snapshot of the implementation decisions in force at
 A. Forst / Advances in Accounting, incorporating Advances in International Accounting 30 (2014) 187195
the time of this writing. As EU and EEA member countries revise and/or
expand their use of IFRS, researchers in the future may wish to reassess
whether or not traditional accounting classications continue to be
relevant in the IFRS era.
Acknowledgments
I especially thank the associate editor, Robert Larson, and two anon-
ymous referees for their helpful comments and suggestions. For their
comments on an earlier draft of this paper, I am also grateful to the
participants at the 2011 American Accounting Association Ohio and
Mid-Atlantic region conferences. I would like to thank Matt Geiszler
for his research assistance.
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