Stated Preferences for the Adoption of IFRS and UK GAAP: Case Study Vignettes

Abstract

Our aim is to see if the adoption of International Financial Reporting Standards (IFRS) is beneficial. Our methodology involved both quantitative methods (with non-parametric tests) and qualitative methods (with case study vignettes) in a complementary way, as in the ‘mixed method’. Our objective was to use a formal metric, adapted from economic choice theory, to analyze choosing behavior in firms over financial reporting standards, using calculated ratio and net utilities. Our evidence and analysis are based on a random sample of twenty-one UK firms. From these firms, primary source data were collected, using questionnaires and fieldwork interview tools, to enable the testing of our hypothesis that the adoption of IFRS was beneficial. Using robust non-parametric statistical tests, we found that public firms which had to adopt IFRS, as a matter of necessary policy compliance, often perceived this imposed choice to be unbeneficial, refuting our null hypothesis. This finding is highly statistically significant. The implication of our qualitative evidence was that this perception of lack of benefit in adopting IFRS created a voice for regulatory change.