How can the adoption of the IFRS by SOCPA improve the quality of the information content of financial accounting reports in Saudi Arabia?

The globalization of the world is increasing that results in the improving importance of International Financial Reporting Standards (IFRS). The use of IFRS by SOCPA is improving the quality of financial accounting that is reported in Saudi Arabia. IFRS adoption in Saudi Arabia is facing challenges in banks, insurance companies and Saudi Stock Exchange (Alsuhaibani, 2012). The Saudi Accounting Standards (SAS) is provided by the Saudi organization for certified public accountants (SOCPA).

 The present work includes a detailed analysis of the financial statements. The descriptive analysis is performed in previous researches to indicate the quality of financial accounting in Saudi Arabia (Alsuhaibani, 2012). The reports show that the financial information for the pre-adoption condition is 76.80 % and for the post-adoption, it was measured as 87.09 % for the improved quality of the financial accounting that is improving significantly after adopting the IFRS. The analysis confirms the implementation of IFRS that reinforces quality disclosure. The overwhelming conditions for the IFRS framework are different. The relevant consideration defines the mixed results for the impact of IFRS adoption (Alsuhaibani, 2012).

The overall increase in foreign investment in Saudi Arabia is mandated with the use of IFRS. The failure of IFRS induces impact on the quality of financial reporting. The absence of active marketing has non-financial assets for the management of earning and to avoid reporting for the losses in different regions. Under the impact of International financial reporting standards (IFRS), the major issues are the component of the transaction for the information content is different from the commercial perspective and obligation performance (Alsuhaibani, 2012). The fair valuation is different for each component and the current Saudi Accounting standards provide more enough information in this process. Due to the proper implementation of content information, the reports of financial accounting define advanced development. Saudi Arabia successfully achieved a place in the group of twenty finance ministers and Central bank Governors in the past three years. Several types of research are conducted to identify the impact of International financial reporting standards (IFRS) on the adoption process for the traded companies. The mandatory adoption policies of Saudi Arabia are benefited by the experiences during the transition period and transparent financial statements. The positive relationship is developed between the size of firms, transparency, public subsidiaries, and membership in the independent board (Alsuhaibani, 2012).

The corporate governance along with the implementation of IFRS develops the relationship between the liquidity and the levels of disclosure in the business sectors. The financial reporting standards can reduce the cost and period of transition in the accounting standards. The expected differences for the cost of equity capital are different and increase with the non-local accounting standards. The economic consequences are mandatory for the process of reporting in the International financial reporting standards (IFRS). In the empirical research, the international accounting standards are higher in Saudi Arabia and increase the market stock value, lowers the cost of capital, and increases the market liquidity (Alsuhaibani, 2012).

Reference

Alsuhaibani, A. (2012). The Expected Impact of IFRS Adoption on Saudi Arabia Based on Lessons from Other Countries: A Focus on the Telecommunication Business. Procedia - Social and Behavioral Sciences, 62(01), 1190-1198.