Commentary: Has Australia (or Any Other Jurisdiction) ‘Adopted’ IFRS?1

A ngus Thomson of the Australian Accounting Standards Board (AASB) states that: ‘Australia definitely adopts IFRSs’ (Thomson 2009, p. 153). This was in response to Nobes (2008, p. 283) who wrote that: ‘Australia has chosen not to “adopt” IFRS, but to converge its standards with IFRS’. The distinction has major legal and political aspects. It can affect preparers, auditors and users. This paper examines the meaning of ‘adoption of IFRS’ in the context of jurisdictions. Before turning to that, the term ‘IFRS adoption’ has also been used in the context of company choices. In the academic literature, in this context, the term has generally been used in a clear way: to mean full-scale voluntary use by a company of IFRS as issued by the IASB, before such use became compulsory in its jurisdiction (for example, Ashbaugh 2001; Ashbaugh and Pincus 2001; Barth et al. 2008; Leuz 2003; Radebaugh et al. 2006; Roberts et al. 2008). This entity-level meaning of ‘adoption’ is also that of the IASB’s own IFRS 1 First-time Adoption of International Financial Reporting Standards. A starting point for discussing the approach of jurisdictions to IFRS is that the International Accounting Standards Board (IASB) has no authority of its own to impose accounting standards. This feature is shared with the generality of standard setters, including the Financial Accounting Standards Board (FASB) of the United States (US). A set of standards (for example, IFRS) can be accepted into a jurisdiction by several different methods: adopting the standard setter’s process, rubber stamping each standard, endorsing them (with the possibility of some differences), fully converging national standards, partially doing so, or merely allowing use of the IASB’s standards. These methods will be examined. This debate about adopting the process was key at an earlier stage of international standardisation. In the 1990s, the International Accounting Standards Committee (IASC) put great efforts into trying to persuade the International Organization of Securities Commissions (IOSCO) to endorse international standards by adopting the IASC’s process rather than by examining its standards one by one (Kirsch 2006, p. 293; Camfferman and Zeff 2007, pp. 323–4). This paper replies to a statement made in this journal that ‘Australia definitely adopts IFRSs’. We analyse and compare the several methods that jurisdictions can use to implement International Financial Reporting Standards (IFRS). These include adopting the International Accounting Standards Board’s (IASB) process of setting standards, as well as various forms of standard-bystandard implementation. We conclude that the Australian method of implementation is different in major ways from those used in such countries as Israel and South Africa, which involve adopting the IASB’s process. By contrast, Australia follows a multi-step process of enrolling each new standard into a category still entitled ‘Australian Accounting Standards’. To refer to the Australian method as ‘adoption’ of IFRS might therefore mislead, even though Australian companies eventually comply with IFRS.