Challenges and opportunities from adopting IFRS in Saudi Arabia: the case of the banking sector

Almansour, M.S., 2019. Challenges and opportunities from adopting IFRS in Saudi Arabia: the case of the banking sector. PhD, Nottingham Trent University.

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Abstract

Purpose: In February 2012, the Saudi Organisation for Certified Public Accountants (SOCPA) formally approved the transition to IFRS "through a Project for the Transition to International Accounting and Auditing Standards", to be completed by 2017 (IFRS, 2017). The Saudi Arabian Monetary Authority (SAMA) now requires all listed and unlisted banks and insurance companies to use IFRS, but all other entities, irrespective of their size, are required to use the local GAAP as issued by SOCPA (IFRS, 2017). This raises questions firstly, about the comparability of financial statements between companies using IFRS and GAAP and secondly, about the reasons why the transition to IFRS has been only partial. A number of studies have investigated IFRS implementation in developing countries (Tyrrall, Woodward and Rakhimbekova, 2007), enhancing our understanding of the importance of IFRS adoption, its benefits and its challenges. None of these, however, have investigated IFRS transition or the associated challenges in the context of the Saudi Arabia. Furthermore, the majority of prior researches in developing countries are descriptive, documenting the implementation tools of IAS/IFRS but lacking any evaluation of the elements which enable or restrict IAS/IFRS dissemination within these countries. No research has been conducted in relation to the institutional pressure that influenced Saudi Arabia to adopt IFRS. This study addresses this gap by adopting new institutional theory to overview the external and internal forces that influenced the country's banking sector to adopt IFRS, and to determine the challenges and opportunities which arose during the adoption process.

Theoretical framework: This study adopts new institutional theory to overview the external and internal forces that influenced Saudi Arabia to adopt IFRS, and to determine the challenges and opportunities which arose during the adoption process. A limited number of studies have discussed the adoption of IFRS in countries such as Saudi Arabia, which have a social, legal and political structure which differs greatly from those countries backing international accounting standards. No research has been conducted in relation to the institutional pressure that influenced Saudi Arabia to adopt IFRS.

Methodology: A pragmatic approach, combining quantitative and qualitative methods, was considered the most suitable for the study. A questionnaire was deployed to uncover the perceptions of the chosen group towards the adoption of IFRS in Saudi Arabia. Semi-structured interviews were then conducted with relevant groups to gather data beyond the scope of the questionnaire and to gain a fuller understanding of participants’ perceptions. Four hundred and forty questionnaires were distributed, of which 254 were returned completed. Twenty-two interviews were conducted with standard setters from SOCPA and SAMA, bank CFOs and external auditors.

Findings: The analysis reveals that most of the study participants agreed with SAMA and SOCPA’s decision to adopt IFRS. Indeed, most felt strongly that the standards should have been implemented earlier in Saudi Arabia and in all sectors, not just some. The findings illustrate that the capital market was a key factor influencing Saudi Arabia to shift from its own standards, and that the greatest perceived benefit of IFRS adoption was an improvement in the quality of financial reporting and reporting transparency. The main obstacles were perceived to be the lack of competent specialists in Saudi Arabia and the lack of IFRS implementation guidance. The analysis of the interviews enriched the study results, aiding interpretation and allowing the researcher to draw meaningful conclusions. The results are expected to contribute to the accounting and finance literature on emerging economies and the Gulf countries.

Item Type: Thesis
Creators: Almansour, M.S.
Date: 2019
Rights: This work is the intellectual property of Manea Salem Almansour. You may copy up to 5% of this work for private study, or personal, non-commercial research. Any re-use of the information contained within this document should be fully referenced, quoting the author, title, university, degree level and pagination. Queries and requests for any other use, or if a more substantial copy is required, should be directed to the owner of the Intellectual Property Rights.
Divisions: Schools > Nottingham Business School
Depositing User: Linda Sullivan
Date Added: 01 Apr 2020 08:14
Last Modified: 01 Apr 2020 08:14
URI: http://irep.ntu.ac.uk/id/eprint/39525

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