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New Institutional Theory (NIS) is being used by the researchers in subjects such as business, management, political science, and sociology and information technology. In a similar way, this theory is now used in accounting field to have an understanding about various case studies covering accounting, auditing and financial management accounting. Researchers use this as a tool to have an understanding about the behavior of an entity, or a state or a nation for the worldwide acceptance of global accounting standards (Albu & Alexander, 2014).
Coming to IFRS Convergence, institutionalization is a process of analyzing the level of acceptance of global accounting standards by a nation for the aim of having harmonized accounting standards internationally. Researchers use the tool of NIS for analyzing quality and quantity. When a country decides to adopt IFRS standards and replace its previous accounting standards, it looks forward for economic benefits in terms of declined cost of capital, increasing of foreign investments, etc. However, studies say that IFRS adoption is more for having a legalized institutional status than having economic benefits.
IFRS adoption is just not another accounting exercise but a complex process that would take months for a clear adoption. Also, the organizations do not have a comprehensive knowledge about IFRS norms and therefore, its adoption is costly in terms of hiring of IFRS experts, installation of new information technology system, better controls over the business environment, etc. However, what needs to be focused upon is the bigger picture where IFRS aims at creation of globally united nation that would deliver transparency, quality and quantity of financial reports of an entity. With previous collapses, lessons have been learnt and IFRS have been set in that way itself to satisfy stakeholder's needs (Nobes, 2015).
Thus, we can conclude that IFRS convergence will be the best initiative for the preparation and presentation of financial reports which are highly qualitative and quantitative. Global acceptance of consistent accounting standards is a dream of International Accounting Standards Board (IASB) and qualitative reports will bring it into reality. For maintaining the trust of the stakeholders in the companies, company's trust in the global accounting standards and of the general public in the market, qualitative reports are important and that is possible through IFRS Convergence. For example, recently India has replaced its accounting standards with Indian Accounting Standards that are complying with IFRS norms (Ali, Ahmed & Henry, 2006).
Though IFRS adoption is a comprehensive process in terms of having detailed disclosures, it is still better to prepare IFRS based financial reports that facilitates the global comparative analysis among companies, transparency, fair presentation, better understanding of business environment & operations and satisfaction of stakeholder's needs. The required changes might be dramatic for the coming years but time would be the best judge to tell us whether such global efforts are resulting in the fulfillment of expectations or not (M?s?rl?o?lu, Tucker & Yükseltürk, 2013).
1. Albu, C. t. l. N., N. Albu, and D. Alexander. 2014. When global accounting standards meet the local context? Insights from an emerging economy. Critical Perspectives on Accounting 25 (6):489-510.
2. Ali, M. J., K. Ahmed, and D. Henry. 2006. Harmonization of Accounting Measurement Practices in South Asia. Advances in International Accounting 19:25-58.
3. Chand, P. 2005. Impetus to the success of harmonization: the case of South Pacific Island nations. Critical Perspectives on Accounting 16 (3):209-226.
4. He, X., T. J. Wong, and D. Young. 2012. Challenges for Implementation of Fair Value Accounting in Emerging Marketing Management: Evidence from China. Contemporary Accounting Research29 (2):538-562.
5. Irvine, H. 2008. The global institutionalization of financial reporting: The case of the United Arab Emirates. Accounting Forum 32 (2):125-142.
6. M?s?rl?o?lu, ?. U., J. Tucker, and O. Yükseltürk. 2013. Does Mandatory Adoption of IFRS Guarantee Compliance? The International Journal of Accounting 48 (3):327-363.
7. Nobes, C. 2015. IFRS Ten Years on: Has the IASB Imposed Extensive Use of Fair Value? Has the EU Learnt to Love IFRS? And Does the Use of Fair Value make IFRS Illegal in the EU? Accounting in Europe, 12 (2):153.