International Financial Reporting Standards Impact

1. BACKGROUND OF THE STUDY

The adoption rate of International Financial Reporting Standards (IFRS) has been on the ascendency since its inception in 1973. The number of countries that have adopted IFRS as a basis for financial reporting are more than hundred with others agreeing to converge or adopt it by 2011 (Deloitte, 2008). The need for transparency and comparability of financial statement across countries has increased the desire to adopt a single set of global financial accounting reporting standards (IFRS Insight: IASplus, 2008). Trade liberalisation and globalisation of capital markets have given further impetus towards the adoption of IFRS as a single set of high quality globally accepted accounting and reporting standards as against national accounting standards. The contributions of high quality financial reporting systems in national jurisdictions that experience high economic growth, stable fiscal and monetary systems and access to international investment funds cannot be overemphasised (Wong, 2004). The need to ensure high quality reporting has forced both developed and emerging capital markets to adopt or converge with IFRS, their national accounting standards.

Emerging Capital Markets (ECMs), which constitute a significant part of the global financial market, compete with their developed counterparts for investment funds due to globalization of businesses and integration of capital markets. This exposes the financial reporting information in ECMs to international scrutiny. It has been suggested that ECM’s ‘lag’ behind the advanced capital markets in terms of adequacy and reliability of information disclose in annual reports (Ali et al, 2004).

The perceived low quality of financial reporting inhibits the growth of ECMs due to its ability to erode the confidence of investors (Enthoven, 1981) and can lower productivity in the economy. Sutton (1997) asserts that a high level of accountability and transparency in corporate dealings increases the confidence of investors in capital markets. It is imperative that high quality financial reporting must be provided to investors to reduce moral hazards as a result of the agency problems created by the separation of ownership from control.

Bekaoui (1999) suggests that the adoption of IFRS is the only way to trust accounting information from developing countries. Some ECMs have adopted IFRS to portray that they are following internationally best practice of financial reporting and to take advantage of the world’s investment funds. However, IFRS which is believed to have been developed for the advanced capital markets may not be an ideal accounting standards for ECMs which are made up of small, medium and sometimes family-owned businesses. Nobes (1998) suggests that due to the nature and characteristics of firms in developing/emerging economies, “the full panoply of the rules of IASs may seem unduly complex; and the resulting financial statements unduly detailed and expensive”. Choi and Mueller (1984) and Belkaoui (2004) support the suggestion of Nobes (1998). In spite of these challenges many countries in emerging economies have allowed their companies to report on the basis of IFRS either mandatorily or voluntarily. Mandatory adoption of IAS/IFRS have the tendency to deprive firms the opportunity to choose accounting standards that reflect their information needs and the nature of their business. It has been suggested that IFRS adoption is costly but beneficial and at the same time poses challenges to companies (e.g.El-Gazzar, 1999; Jermakowicz, 2004; Barth et al, 2005; Daske and Gebhardt, 2006; Jermakowicz and Gornik-Tomaszewski, 2006; Daske et al, 2007; Tyrall et al, 2007; Hail et al, 2009). Ball (2001) suggests that companies will experience the impact of IFRS adoption differently due to different regulatory framework and institutional factors across different countries. Research into the costs, benefits and challenges of IFRS adoption to ECMs in sub-Saharan Africa, is non-existent to the best knowledge of this researcher. The adoption of IFRS in Ghana might challenge its neighbours to also follow suit. Therefore, research into the cost and benefits and implementation challenges is needed to guide other countries on the decision whether to adopt IFRS for financial reporting. It is in this light that this study is being undertaken.

1.2 STATEMENT OF THE PROBLEM

The adoption rate of IAS/IFRS has been on the ascendency since its inception in 1973 (IASB.org, 2004). Capital Markets have been forced to adopt IAS/IFRS by the World Bank, International Organisation of Securities Commissions (IOSCO) and World Trade Organisation (WTO), THE European Union (EU) and the International federation of Accountants (IFAC) due to globalization of trade and liberalization of capital markets.

The Institute of Chartered Accountants (Ghana) is the body responsible for the issuance of accounting standards in Ghana. Prior to the mandatory adoption of IAS/IFRS 2007, two sets of accounting standards were in use in Ghana; the Ghana Accounting Standards (GAS) issued by the Ghana National Accounting Standards Board(GNASB), and the International Accounting Standards (IAS/IFRS). The Ghana Accounting Standards were adaptation of the International Accounting Standards. Ghana, being a member of the International Federation of Accountants (IFAC), allowed companies to issue financial report based on International Accounting Standards.

The credibility and quality of financial reporting in emerging capital market have not been able to match the high standards of reporting in developed capital market and Ghana, an emerging economy, is no exception. In 2004, the World Bank commissioned a report into accounting and auditing in Ghana. The report painted a gloomy picture of financial reporting and auditing in Ghana. The World Bank (ROSC-Ghana, 2004, p1) noted that;

“The accounting and auditing practices in Ghana suffer from institutional weaknesses in regulation, compliance and enforcement of standards and rules. Various weaknesses were indentified in the laws and regulation governing financial reporting”.

The report observed an inadequate compliance with the Ghana Accounting Standards and also made mention of the fact that some companies claim to comply with the International Accounting Standards in their annual reports but fail to do so.

Consequently, the ICA (GHANA) in January 2007 adopted IFRS as the basis for financial reporting for all listed companies beginning 31^st December 2007 due to the recommendation made by the World Bank. However, first time IAS/IFRS reporting date for all companies was extended to 2008 due to companies’ unpreparedness to migrate from Ghana Accounting standards to international standards.

In spite of the world-wide acceptance of IAS/IFRS for financial reporting, the jury is still out about the costs and benefits of IFRS implementation to listed companies that adopt IAS/IFRS either voluntary or mandatory (e.g. El-Gazzar et al, 1990; Jermakowicz, 2004; Hoogendoorn, 2006; Jermakowicz and Gomik-Tomaszewski, 2006; Daske et al, 2007; Hail et al, 2009).

Generally, little empirical evidence has been provided on whether the costs of IAS/IFRS adoption outweigh the benefits. Specifically, literature on the costs and benefits of IAS/IFRS implementation to listed companies in ECMs in Africa is limited.

This study seeks to investigate out the costs and benefits of IFRS adoption to listed companies in Ghana.

1.3 RESEARCH OBJECTIVES AND RESEARCH QUESTIONS

Ghana, in a bid to develop its capital markets, established the Ghana Stock Exchange (GSE) in 1989. The GSE became operational in 1990. Currently, there are thirty-four listed companies in Ghana. The adoption of IFRS for financial reporting became mandatory in Ghana after its official launch in 2007 by the Minister of Finance and Economic Planning. However, listed companies were given additional year to fully implement IFRS. These events provide the opportunity to access the impact of IFRS adoption on listed companies in Ghana.

The main purpose of the study is to access the costs and benefits of IFRS adoption to listed companies. Primarily, the issue focused on are costs, benefits, and implementation challenges to listed companies in Ghana.

The specific research questions pursued in this study are follows:

1. What are the benefits of IFRS adoption to companies in Ghana?

2. What are the costs of implementing IFRS?

3. What challenges do companies in emerging capital markets face as results of IFRS adoption?

4. What are the effects of retrospective application of IFRS (IFRS1) on financial prior period’s financial statements?

1.4 METHODOLOGY

Two research techniques are used to collect data on the cost, benefits and IFRS implementation challenges. Interviews and content analysis of some selected annual reports are used in this study.

The interviews are used to ascertain the opinions on the costs, benefits and implementation challenges of IFRS adoption from ( ) finance directors/chief finance officers/ finance managers whose firm’s are all listed in Ghana. Interviews were conducted with the Big 4+1 auditing firms in Ghana. These audit firms provide audit and other accountancy services to about 95 % of the listed companies in Ghana. The interviews with auditors were necessary to seek additional insight and to validate the results of the interviews conducted with FD/CFO/FM.

1.5 CONTRIBUTION OF THE STUDY

This study is undertaken bearing in mind the following contributions it intends to achieve:

1. To the best knowledge of this researcher, this study is the first of its kind in Sub-Saharan Africa and could inform policy makers in other ECMs about the costs, benefits and implementation challenges when companies are forced to adoption IFRS as a bases of financial reporting.

2. The study is of tremendous use to the International Accounting Standards Board (IASB) to evaluate the costs and benefits of its standards to companies and the implementation challenges to take steps to reduce the costs and challenges and improves on the benefits. This will help the IASB to achieve its aim of standardisation of financial reporting around the globe.

3. The study could also help inform companies worldwide which decide to adopt IFRS voluntarily about the costs, benefits and implementation challenges before venturing into such initiative.

1.6 ORGANISATION OF THE STUDY

This study has been structured into six chapters. The content of each chapter is detailed below:

CHAPTER ONE: INTRODUCTION

The background of the study, which comprises the introduction, and the statement of the problem are stated. The appropriate research objectives and specific research questions used to achieve the objectives are specified. The contributions of the study are expressed. The chapter ends with the organization of the entire study.

CHAPTER TWO: EMERGING CAPITAL MARKETS AND FINANCIAL REPORTING ENVIRONMENT IN GHANA

This chapter starts with the discussion of emerging capital markets. Land and people of Ghana, the economy of Ghana, forms of business ownership, the evolution and the role of the Ghana Stock Exchange, and sources of financial reporting regulation in Ghana are covered in this chapter. The chapter ends with the summary of issues covered in the chapter.

CHAPTER THREE: LITERATURE REVIEW

This chapter discusses the role of capital markets, the importance of financial reporting in capital markets. The role of listed companies in promoting financial reporting, the history of the International Accounting Standards, recent trends towards worldwide adoption of IFRS, and the importance of IFRS adoption, prior empirical research, and gaps in the literature are covered under this chapter. All these are studied to put the topic in context. The chapter ends with a summary of the issues discussed.

CHAPTER FOUR: METHODOLOGY

The methods and techniques used to collect the data and their advantages and limitations are discussed. The issues studied in this chapter are: justification for the choice of Ghana, definition of the period studied, profiles of companies and research instruments. The primary data collected through questionnaire and interviews are quantified using descriptive statistics. The chapter ends with the summary of activities undertaken.

CHAPTER FIVE: FINDINGS

This chapter analyses and discusses the results obtained from the descriptive statistics conducted in previous chapter.

CHAPTER SIX: CONCLUSION

This chapter reminds of the research objective and questions studied including the procedure for data collection and analysis. The chapter presents the key findings of the study undertaken. The chapter also presents the limitation of the study and suggestions for future research. It ends with the coverage of the overall conclusion of the study.

CHAPTER TWO

COUNTRY PROFILE AND FINANCIAL REPORTING ENVIRONMENT IN GHANA

2.1 INTRODUCTION

The environment within which a study is undertaken influences the methodology to be used and the weight readers should put on the conclusion drawn from the study. Therefore, understanding the social, political, cultural, and economic within which this study is undertaken is important. This chapter puts the research environment in context. The location and peoples of Ghana is provided in section 2.2. Section 2.3 presents political development in Ghana. Section 2.4 outlines the structure of the Ghanaian economy. The financial reporting system in Ghana is presented in section 2.5. Section 2.8 summaries the issues studied in the chapter.

2. THE LAND AND PEOPLE OF GHANA

Ghana is sub-Saharan African country located along the Atlantic Ocean with a total land area of 238,539 square kilometres. Ghana shares borders with Togo, Cote d’Ivoire and Burkina Faso. There are ten regions in Ghana. These regions are broadly categorised into two: Northern and Southern sector. The major vegetation of the northern sector is savannah but the southern sector is predominantly rainforest belt. The population of the country as at the last population census in 2000 was 18.91 million with an annual growth rate since 1984 – 2000 of 2.7% (GSS.2007).The population density of the country is 79.3% with greater concentration in the southern part of the country. The temperature is generally between 21-32°C (70-90°F). The Ghana Statistical Service puts the literacy rate in the country at 34.2%. There are about 56 different languages in Ghana due to the many ethnic groups. The English language is the official language of the country.

3. POLITICAL DEVELOPMENT IN GHANA

Ghana was the first country in sub-Saharan Africa to gain independence from the British in 6^th March, 1957. Ghana became a republic in 1 July, 1960. Ghana is a member of many notable international organisations some of which are as follows: the Africa Union, the World Bank Group, the Commonwealth, ECOWAS, International Monetary Fund, Africa Development Bank, the African Peer Review Mechanism and the Economic community of West Africa States.

Ghana after going through four successful coup d’états return to democratic rule in 1992 under executive presidency. The nation has enjoyed an uninterrupted democratic regime since 1992. The last election of the country was held on the 7^th of December 2008. National Democratic Congress, a party with social democratic ideology took over the reigns of government from the New Patriotic Party- a party with capitalist philosophy.

Internationally, Ghana is seen as a beacon of hope on the continent of Africa because of her democratic credentials.

4. THE ECONOMY OF GHANA

The economy of Ghana depends predominantly on agriculture, mining and quarrying and forestry. The economy has been designated in three major sector-agriculture, service and industrial sector. Agriculture is the main economic activity and currently accounts for about 34.3 of GDP, followed by 31.0% from the Services sector (GSS, 2007). Ghana relies mostly on Cocoa and Gold for its foreign currency earnings. The industrial sector contributes. Ghana has recently discovered oil in commercial quantities with first lifting expected in the year 2010.

The GDP growth rate of the country between 2005 and 2008 are as follows: 5.9%, 6.4%, 6.3% and 7.2% percent respectively (World Bank, 2008). The currency of the country was re- denominated in July 1, 2007 by setting ten thousand Cedis to one Ghana Cedi. This was done to remove dead weight zeros of the old cedis as the volume and value of transaction keeps increasing to make recording easier (GOG, 2008). In 2007, Ghana successfully raised US $750M from the Euro Bond Market. The bond was oversubscribed by the international community. The oversubscription and the quality and internationality of the investors were attributed to the confidence of the international community in the Ghanaian economy (MoFEP, 2008).

5. FINANCIAL REPORTING ENVIRONMENT IN GHANA

2.5.1 Sources of Financial Reporting Regulation in Ghana

The government and the private sector are responsible for financial reporting regulation in the country. The government exercise its responsibility through the department and the agencies under its purview – namely: Registrar General’s Department, Securities and Exchange Commission, Bank of Ghana and the Insurance Commission. The Ghana Stock Exchange (GSE) and the Institute of Chartered Accountants (Ghana) (ICAG) are the private sector institutions responsible for financial reporting regulation in the country.

2.5.2 The Registrar General’s Department (RGD)

Every company in Ghana is expected to registrar with the Registrar of companies in accordance with the Companies Code 1963, Act 179. The Registrar General’s Department in Ghana is responsible for the issuance of certificate of incorporation and commence before a company can start its operating activities. Companies are expected to submit their annual account to the (RGD). The RGD has the power to exempt a company from disclosure requirements.

2.5.3 Bank of Ghana

The Banking Law 1989, PNDC 225 gives the Central Bank, Bank of Ghana (BoG) an oversight responsibility over the banking and non-banking financial services institutions in Ghana. Banks and non-banking financial institutions are suppose to comply with financial reporting requirements in Ghana in addition to Manual of Accounting and Auditing specified by the BoG. The BoG regularly visits the banks and nonbanking institutions in the country. Financial and nonfinancial banking institutions are supposed to file their annual returns with the BoG.

With the adoption of IFRS Ghana, banking and non-banking financial institutions are required to comply with IFRS in addition to the Accounting and Auditing Manual specified by the BoG and the requirements of the Companies Code 1963, Act 179.

2.5.4 Internal Revenue Service

The Internal Revenue Service is empowered by the Government of Ghana to develop the forms and basis of taxation in Ghana. Taxes, which affect corporate financial reporting, are as follows: corporate tax, capital gains tax, stamp duty, gift tax and national reconstruction levy, value added tax and now the Economic Stabilisation Levy.The Customs Excise and Preventive Services (CEPS) levy imports and Exports duties on companies.

2.5.5 Institute of Chartered Accountants (Ghana)

An Act of Parliament, Act 170, established the Institute of Chartered Accountants (ICA) (Ghana) in 1963. The Act 170 empowers the ICA (Ghana) as the regulator of financial reporting in Ghana. The members of ICAG are only persons recognised under the Companies Code, Act 179, for the purpose of audit of company’s account. Until the adoption of IFRS in Ghana, the Ghana Accounting Standards (GAS) that was in used was adaptation of the IASC standards after the each IASC standard was reviewed. The ICAG is a member of the International Federation of Accountants and Association of Accountancy Bodies in West Africa.

1. Ghana Companies Code 1963, Act 179

The companies’ code 1963, Act 179 prescribes the nature and form of information which must be provided in the annual reports and accounts of corporate entities in Ghana. The Companies Code defines annual reports and accounts as director’s report, profit and loss accounts for a period, balance sheet as at the end of the period, notes to the accounts and the auditors report. Section 124 (1) enjoins directors of corporate entities to prepare and submit audited accounts to members and debenture holders every calendar year at intervals of not more than fifteen months. With the adoption of IFRS companies are required to comply with the requirements of the Companies Code in addition to the measure and disclosure requirements as specified by the IASB. In Ghana, failure to comply with the provisions of the Companies Code carries sanctions.

2.5.6 Ghana Stock Exchange (GSE)

The Ghana Stock Exchange (GSE) was incorporated as a private company in 1989 under the Companies Code Act 179(GSE WEBSITE). Trading on the floor of the exchange commenced on November, 1990. There were thirty-five (34) companies listed on the GSE as at 31^st December, 2008. Trust Bank Gambia Limited is only foreign issuer on the GSE. The total volume of shares traded on the exchange in the year 2008 were two hundred and six teen million, five hundred and eighty four thousand and six hundred (216,584,600). The year-to-date performance of the GSE as at 31^st December, 2008 was 58.06%. The Stock Exchange Listing Regulation 1990, Legislative Instrument No.1509 instructs listed companies to make additional disclosure in their annual reports regarding the number shares and stated capital, information about the company secretary and registrars, transactions with directors, statement of source and application of funds, interim reports and unaudited report to the GSE prior to the submission of audited annual reports. The role of the GSE is to win the confidence of the investing public (internal and external), protect investors and encourage companies to raise funds through the equity and debt markets.

Therefore, IFRS which has been perceived by the IASB to be a high quality accounting standards will help the GSE in their quest to build confidence and protect investors. The focus of this study is the impact of this perceived high quality standards on listed companies in Ghana which to the best knowledge of this researcher has not yet been studied.

2.5.7 International Financial Reporting Standards

With the adoption of IFRS in Ghana, listed companies are require to comply with the measurement, presentation and the disclosure requirements of applicable standards in addition to the requirements of the Companies Code 1963 Act 179 and the Banking Law 1989.

6. Summary

Globalisation of businesses and integration of capital markets of which GSE is part, makes it imperative that financial reporting practices of listed companies’ should be reliable, relevant, verifiable, comparable and confirm with international financial reporting standards. Financial reporting is affected by the social, political and economic environment within which its’ operates. This chapter discussed the country profile of Ghana and the financial reporting environment in Ghana.

The next chapter reviews the literature.

CHAPTER 3

LITERATURE REVIEW

3.1 INTRODUCTION

The issues studied in this chapter include conceptual issues and theoretical framework on the impact of IFRS adoption on companies. Specifically, the issues studied include, the meaning and history of international financial reporting standards, IFRS adoption around the world, the role of capital markets, the relevance of IFRS to emerging capital market and theoretical framework on the impact of IFRS on companies.

3.2 HISTORY OF INTERNATIONAL ACCOUNTING FINANCIAL STANDARDS BOARD (IASB)

The International Accounting Standards Board (IASB) is private non-profit making organisation responsible for the development, issuance and approval of accounting standards to form the basis of financial reporting. The objective of the IASB is to,

“provide the world’s capital markets with a single set of high quality accounting standards to be used as a common language for financial reporting” (IASB. org).

The IASB came into effect in 2001 to replace the International Accounting Standards Committee (IASC).The IASC was formed by a group of professional accountants from nine countries (Australia, Canada, France, Germany, Japan, Mexico, Netherlands, United Kingdom/Ireland, and the United States of America) in 1973. Sir Henry Benson, who put forward a proposal for the formation of IASC at the 10^th World Congress of Accountants in 1972, was elected the first chair in 1973 (IASPLUS.org). The immediate tasks of the IASC were the development of accounting standards on accounting policies, inventories, and financial statements. The IASC issued its first accounting standards in I975. The accounting standards developed and issued by the IASC were called the International Accounting Standards (IAS). These accounting standards are still in used today. The IASB and its predecessor lack the power and authority to ensure that companies that adopt their them are complying with their standards. They rely on national standard setters to ensure that companies comply with their standards.

3.3 THE MEANING OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Accounting standards are a set of rules, regulation, and convention that guide the preparation of financial statements and financial reports. Accounting standards form the basis for the preparation and auditing of corporate annual report. Accounting standards are developed based on conceptual framework and in the case of the IASB the ‘due process.’ Conceptual framework for the preparation of account has been described as a constitution (FASB, 1976; Miller, 1985; Solomon, 1986) which forms the basis for developing accounting standards. Conceptual framework are developed to guide standard setters to ensure consistency in issuing future standards and as a guide in settling accounting issues in situations where there are no accounting standard ( IAS.PLUS.org). The conceptual framework defines the elements in the financial statements, how they are recognised, measured and presented which serve as a point of reference to management in situations where there are no accounting standards (IAS. 8). Conceptual framework is not an accounting standard in itself. In situation where there is a clash between a particular standard and conceptual framework, the interpretation of the accounting standard supersedes that of the conceptual framework.

The development of accounting standard undergoes several stages before it is published. The process through which a project undergoes before it is finally issued or rejected through voting is known ‘Due Process.’ ‘Due Process’ allows interest groups (preparers, users, auditors, analyst, academia etc) to take part in the standard setting process through the submission of comments. In spite of the democratic nature of the standard setting process, prior research document intense lobbying by constituents of the standards setters (see Zeff, 2002; Georgiou, 2004; Cortese et al, 2006). Accounting standards can at best be thought of as a compromise between competing constituents.

International Financial Reporting Standards (IFRS) are developed and issued by the IASB. The standards issued by the IASC are called International Accounting Standards (IAS). IFRS has both narrow and broad meaning (IAS PL US.org). In the narrow sense, IFRS refers to the sets of new standards issued by the IASB different from the previous standards (IASs) issued by the IASC. The IASB has issued eight new standards (IFRS 1, 2, 3, 4, 5, 6, 7 and 8) since 2001. Broadly, IAS 1.11 defines IFRS as the entire standards (IFRSs and IASs) as issued by the IASB and IASC respectively and the interpretations issued by the International Standards Interpretation Committee (IFRIC) and the Standards Interpretation Committee (SIC).

3.4 IFRS ADOPTION AROUND THE WORLDWIDE

IFRS has gained acceptance as a single set financial reporting standards in countries around the world. Deloitte (2008) suggests that globalisation of capital markets have created the need to scrap local standards in favour of international standards and benchmarks and attributed IFRS adoption as single set of global accounting standards as the best example towards this end. Deloitte asserts that more than hundred (100) countries have adopted IFRS for financial reporting but others including (Chile, Korea, Brazil, India, and Canada) have agreed to adopt or converge to IFRS by 2011. Chile and Japan have agreed to work the IASB to eliminate the difference between their local GAAP and the IFRS to ensure convergence.

The European Union (EU) in 2002 mandated all listed companies within the EU to issue financial report using IFRS beginning 2005 (EC No. 1606/2002). This applies to new countries that will be admitted to the EU membership. This development made the EU the largest customer of the IASB because no continent had and have still not taking such bold initiative. Even though IFRS is mandatory for all listed companies in the EU, the EU does not issue blanket adoption of the standards issued by the IASB. The Accounting Regulatory Committee (ARC) within the European Commission must endorse the standards before they become applicable in the EU. This endorsement process confers political power on EU over the IASB (Whittington, 2005) at least for now. This power would dwindle if the largest capital market of the world, the United States, eventually adopts IASB standards, which has started with the removal of reconciliation requirements ( ) for non-US issuers who issue financial report based on IFRS.

In 1993, the IOSOC tasked the IASC to develop ‘core standards’ to be used for cross boarder listing after the existing standards had been reviewed. The core standards were issued in 1999 and the IOSCO recommended its members to use IASC for cross boarder listing in the year 2000 (IASPLUS.com). Many countries have adopted IFRS due to their association affiliation with politically powerful bodies and their agents, which offer a great deal of assistance, which could be financial, training, trade partnership etc. Ghana perhaps allowed IFRS for financial reporting due to its affiliation with the IFAC (World Bank, 2006) and mandatorily adopted IFRS in 2007 after the recommendation by the World Bank in 2006.

The United States, which would, perhaps be the last country to adopt IFRS, has taken a giant step towards converging the US GAAP with the International Accounting Standards Boards. The US SEC has removed the requirements, which ensures that foreign issuers who report based on IFRS reconcile their financial statement with that of the US (SEC, 2007 A.III.2). The US SEC has developed seven milestones, which must be achieved in order for the SEC to determine in 2011 whether IFRS should be mandatory for US issuers in their filings with the SEC in 2014 (SEC, 2008). When the US finally adopts IFRS it would become the language for reporting as other countries would be attracted to do so (Tweedie, refer to assignment). This development when actualised will lead to global convergence, which has been the long cherished vision of the IASC (now IASB) since its creation in 1973 (Benson, 73; IASB, 2003). IFRS adoption can come in many forms and shapes. Some countries (e.g. South Africa, Ghana) have adopted IFRS without modificat