Examine the Impact of Adoption of IFRS on Gearing: Evidence from UK Companies - Dissertation Example

IFRS is an acronym for “International Financial Reporting Standards” that are considered to be fundamental in establishing broad rules in addition to dictating specific treatments. In the observations made by Ball (2006); Barth et al (2008) and Callao et al (2007), IFRS presents opportunities for upcoming AIM-listed companies to grow robustly. Additionally, Daske and Gebhardt (2006) argue that developing an IFRS niche extends beyond learning the standards per se to include the adaptation of business development and marketing efforts.

This is evidenced by the proliferation of numerous UK subsidiaries of foreign-owned companies that are turning to IFRS for their reporting standards as reported by Chong (2008). It is argued that these companies are likely to benefit extensively by having all entities reporting under one common international accounting system (Cordazzo, 2008). The first wave of transition to IFRS is similarly happening in several AIM-listed companies in the UK as will be demonstrated by the present dissertation.

 The purpose of this paper is therefore to investigate the impact of IFRS adoption on key financial ratios in AIM-listed companies in the UK and attempt to fill any existing knowledge gaps. The paper further contributes to the extant literature on the economic consequences of IFRS adoption as propounded by Bartov et al (2005); Hope et al (2005); Daske and Gebhardt (2006); Ding et al (2006); Jones and Higgins (2006); and Barth et al (2008). In their said works, they concluded that IFRS adoption was economically beneficial to companies.

For this reason, it is my aim to the extent the extant literature that has concrete evidence about the direct effect of each standard on the accounting figures when compared to IFRS (Callao et al., 2007). The first chapter presents a short background to the study, a statement of the research problem, and study objectives. It also lists the research questions the study sought to answer based on the applied research strategy.