The EU motivates the regulation by referring to the enhanced international comparability and transparency of financial statements and improved access to the international capital markets resulting from IFRS usage (Cuijpers and Buijink, 2005). The demand for detailed application guidance will increase substantially, as will the demand for uniform financial reporting enforcement throughout the European Union. Schipper (2005) states “if the IASB declines to provide detailed implementation guidance for IFRS, I predict that preparers and auditors will turn elsewhere, perhaps to US GAAP or perhaps to jurisdiction-specific European GAAP, for that guidance”.
Prior studies show that the level of disclosure (Cooke, 1992; Meek et al., 1995) and the probability of using non-local GAAP (El-Gazzar et al., 1999; Murphy, 1999; Ashbaugh, 2001; Dumontier and Raffournier, 1998; Leuz and Verrecchia, 2000; Leuz, 2003) are positively associated with the number of foreign stock exchange listings of a firm. The impact on financial reporting of cultural differences has been well documented (Nobes and Parker, 2002; Radebaugh and Gray, 2002). There may be more disclosure by
The most significant problem of financial statements and items shown is the complete inconsistency of measurement bases and the application of the historic (acquisition) cost, fair value and the present value (Buus, Strouhal, Brabenec, 2007). At present, the principle of measurement based on the historical cost fades out as it is being gradually replaced by the IFRS trend of reporting fair values, which are, however, difficult to measure in less transparent markets. At the same time, the reporting based on fair value is includes a hidden danger of future volatility of such values and the consequent impact of the changes on financial statements.
Key words: Financial Reporting,
JEL classification: M41 (G30)