A Harvard Business School paper has explored the international political dynamics of IFRS adoption.
The International Politics of IFRS harmonization paper uses field studies in Canada, China and India to analyse how international politics can shape a country’s strategy with IFRS adoption.
The paper isolates two principal dimensions to characterise jurisdictions’ IFRS responses: proximity to existing power at the International Accounting Standards Board (IASB) and the jurisdiction’s own potential political power at the IASB.
Jurisdictions are classified as either ‘high’ or ‘low’ in each dimension, which then produces a matrix of predicted responses to IFRS.
The framework developed can “yield insights into the nature of IFRS itself and its potential structure in the future”, the paper’s author Karthik Ramanna said.
The paper also explores the interplay between the current debates around convergence versus adoption and the IASB’s expanding geographical diversity away from its traditional European power base to emerging powers such as China.
Additionally, the study argues restructuring the IASB’s structure to include fewer Americans may temper enthusiasm for IFRS in the US, which will actually make IFRS less attractive globally.