IFRS mandatory disclosures: Evidence of form over substance in the new EU

Does compliance with International Financial Reporting Standards (IFRS) mandatory disclosures appear in form but not substance? This paper examines the conflicting incentives, both national and European, faced by firms in the European Union (EU) when complying with IFRS mandatory disclosures. The purpose of the study was to test Ball's (2006) assertion that international companies used one of two tiers of IFRS compliance: (a) boilerplate disclosures that present a veneer of uniformity with no national enforcement or (b) detailed disclosures backed by a national enforcement regime. This research reviewed annual reports from 3,300 listed companies within the 27 EU member nations and sampled 150 companies within the EU to see if these companies complied with IFRS mandatory disclosures in a consistent and comparable manner. This study compared compliance levels for the original EU15 member nations with New Member States (NMS). The key findings were that most EU companies did comply in form with Level 1 IFRS disclosures regardless of the country of origin or the level of enforcement. An ADR Listing was very important in predicting Level 1 Compliance. For Level 2, compliance in substance, companies from the EU15 member states and from stronger enforcement regimes had better compliance than those companies from NMS or weaker enforcement regimes. Having a Big 4 auditor and an ADR listing also had a positive influence on Level 2 Compliance.