National institutional factors and IFRS Implementation in Europe: The case of investment property companies

The purpose of this paper is to investigate, following the adoption and implementation of International Financial Reporting Standards (IFRS) in the European Union (EU), whether accounting choices continue to be significantly influenced by national institutional factors with particular reference to cultural values, legal systems and equity market development.

The focus of the paper is on the measurement options available under IFRS with respect to investment property, and a study of factors influencing the accounting choices by 66 European investment property companies as disclosed in their annual reports over the period 2005-2010 is conducted.

National institutional factors and, most importantly, cultural values remain persistently important in explaining accounting measurement choices relating to investment property following the implementation of IFRS in the EU.

The study is limited to investment property companies in the EU. Future studies could be carried out to compare the explanatory power and causal factors involved in different industry contexts and across more countries. Alternative measures of culture may also provide alternative insights.

The paper demonstrates that a nation’s culture and accounting tradition likely has a continuing and significant impact on firms’ measurement decisions. Thus, institutional factors are clearly important in explaining accounting measurement choices and indicate the persistence of international accounting differences even in the context of a globally standardized accounting regime.