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Called to account

A decade since International Financial Reporting Standards (IFRS) were first introduced across Europe, Alliance MBS is gaining a growing global reputation for its research and questioning of the drive to harmonise accounting practice.

IFRS are a principles-based set of standards aimed at providing a common global language for business so that company accounts are understandable – and comparable – across international boundaries.

The drive towards IFRS was borne out of growing international trade and the fact that large companies increasingly operate across many countries. Today IFRS are progressively replacing the many different national accounting standards.

Alliance MBS’ status in this field has been advanced by a number of papers that have examined aspects of IFRS adoption internationally and which have appeared in globally recognised academic journals.

Martin Walker, Professor of Finance and Accounting at Alliance MBS, is among those at the forefront of this research and says the standards have helped multinationals operating across many jurisdictions.

“Typically these companies might want to issue debt and equity securities in different countries, and because of IFRS they don’t have to abide by different accounting standards in different countries. This has had quite an impact.”

However, Martin is among those academics at the School who have also played a key role in critiquing the application of IFRS and the view that there is an inevitability of pursuing one global standard. For instance, Martin himself has raised the idea in one paper that different forms of capitalism require different forms of accounting standards.

Global standing

Alliance MBS’ standing in this field has attracted PhD students from around the world. Hans Christensen is Associate Professor of Accounting at the University of Chicago Booth School of Business and completed his PhD at Alliance MBS in 2008 around IFRS adoption and its particular impact across the EU.

He says he was particularly drawn to the School by its excellent financial information databases. “It is a definite differentiator that Manchester has compared to universities on the European continent, and also compared to Asian universities which, for the most part, don’t have anything like this. What is also important is that the knowledge to understand these databases is in Manchester, and that shouldn’t be underestimated.”

Hans says as well as becoming proficient in managing these data systems, he also built up some excellent industry contacts in Manchester. “From my PhD research one of my big personal selling points was that I could then understand the context of these regulatory issues outside of the US, and particularly across the EU. My work had particular appeal to US business schools because at the time the US was thinking about adopting some of these standards. After completing my PhD I came to Chicago armed with a lot of institutional knowledge about how these standards had worked in Europe.”

PhD interest

Ersa Wahyuni came to Alliance MBS in 2011 and completed her PhD last year. Prior to coming to Manchester she was technical director of the Indonesian Accounting Standards Board, and her studies in Manchester have been sponsored by the Indonesian government.

As Ersa explains: “I was involved in the whole process of IFRS in Indonesia and wanted to learn more from other countries about what they were doing in this whole area. I specifically came to Manchester because its accounting and finance division has such strength in depth, and such a strong reputation in the field.”

Working with Alliance MBS professors Chris Humphrey and Edward Lee, Ersa has extensively studied the IFRS adoption process in several countries including Japan and the US. She says the whole IFRS process is not straightforward and there is much to learn. In particular her study questions how much adoption processes are driven by the quality of international standards, as compared to a cultural commitment to join a global community of IFRS adopters.

“In Indonesia we are converging our own standards closely to IFRS but, unlike a lot of emerging nations, as yet we are not adopting them word by word and still reserve our right to diverge from IFRS whenever necessary.”

Ersa says the initial euphoria around IFRS adoption a decade ago has been slowing down somewhat, partly because the US has still not adopted the standards. “At the moment there is not enough demand from US companies to adopt IFRS. But a decision to adopt IFRS is a decision with a lot of political issues such as the sovereignty of accounting standard setting. The US may eventually adopt IFRS in the future, but it is quite difficult to predict at the moment.”

Meanwhile, well-equipped with the knowledge she has gained from her research, upon completion of her PhD Ersa will become a member of the Indonesian Financial Accounting Standard Board, a post that runs until 2019. Ersa will also continue as an accounting lecturer at Padjadjaran University in Bandung, Indonesia.

She adds: “My PhD has been really exciting and will be useful not only for my career but also for my country. I’ve had a fantastic few years here, and you only have to look at the alumni who have studied this subject here in Manchester to see that MBS really is at the global forefront in this area in terms of both teaching and research.”