An Examination of the Impact of Culture on IFRS Risk Disclosures for Firms that Cross List in the U.S.

• In Event: Emerging Research and Research Interaction 1

Abstract

Accounting disclosures is an important factor in the decision making process of users of financial statements. Past studies suggest how disclosure requirements can be different among countries and how some disclosures are more needed than others. Differences in cultural values across countries may result in different opinions regarding the adequacy or extent of the disclosures on the financial statements. IFRS disclosures such as business combinations (IFRS 3), financial instruments (IFRS 7) and impairment tests (IAS 36) are highly demanded (Riise and Plenborg, 2013). The objective of this study is to examine the effect of culture on IFRS 7 risk disclosures in firms that cross-list in the United States. This study will extend the current literature in the area of culture and IFRS risk disclosure requirements.
The study sample consists of 100 international firms that trade in the New York Stock Exchange. A cross country analysis related to IFRS 7 disclosure level of financial risk will be prepared for each firm. Using Hofstede (1983) and Gray’s theory (1988), each company country will be divided by cultural area and by a level of secrecy and conservatism scale. A scale level of disclosure will be created for each company after considering the extension of the IFRS 7 disclosures in their annual reports. Each company scale level of secrecy and conservatism will be compared with the scale level of risk disclosures to analyze their relationship. A statistical analysis will be prepared to explore the study’s research questions of interest more in depth. The study results will help understand if cultural values have an effect on financial risk disclosures levels and how these disclosures required by new international accounting norms supports Grays’ theory of secrecy and conservatism.

Author

• Carmen B. Rios-Figueroa, University of Puerto Rico-Rio Piedras