Ebook The Influence Of Ifrs Implementation On Business Management In Finnish Born Globals

The purpose of this study was to better understand the influence of the IFRS implementation on business management in Finnish Born Globals (BGs). The issue has not been covered in the existing literature in the context of BGs before. Effects of the IFRS’ voluntary adoption were found but they concentrated mainly on the external benefits gained by the companies (see e.g. Gassen & Sellhorn 2006; Covrig et al. 2007; Soderstrom & Sun 2007). One study (Ikäheimo et al. 2008) suggested that the benefits of adopting international accounting standards could exceed the costs in Finnish Born Globals. Still, no empirical research was made on the possible influences on the internal systems of the BGs. In answer to the research gap this study focused on the question of: How does IFRS contribute to Born Global companies’ development of business management,if at all?

The aim of this study was to understand whether international financial reporting standards benefit Born Global companies. The purpose was not to create an exclusive list of benefits and drawbacks of IFRS implementation in Finnish Born Global companies, but rather to present some benefits and drawbacks experienced when adopting the IFRS as the financial reporting system. The goal was to understand how the adoption of external reporting standards may influence internal processes, planning, and ways of action within an organization.

The study was divided into two parts: analyzing the literature and the empirical research. In the first part, Born Global concept, harmonization of the Financial Reporting Standards, users of financial reports, managerial decision making and financial reporting systems, as well as the outcomes of IFRS implementation were reviewed. To conclude the chapter a theoretical framework was created to clarify the connections between the main themes. The empirical part consisted of interviews from three Finnish Born Global companies from different fields of business. The findings were first presented and explained, followed by the updated framework.

The findings of the study show that positive effects from the adoption of IFRS by the Finnish BGs are to be found. While the IFRS implementation program may be seen as adopting an external reporting system, the impacts of this implementation should not be ignored. Several benefits, accompanied by some drawbacks were discovered.

External positive influences, besides the internal, were documented. The implementation of the IFRS was seen to assure the future financing from investors. It had simplified the reporting of foreign subsidiaries. The location of the subsidiary has become insignificant since companies are able to find auditors with IFRS knowledge all over the world. Therefore, the companies do not need to understand all the local GAAPs of their subsidiaries but it can be left for the consulting auditors of the target country. Financial statements reported according to the IFRS can be published and used as signaling of the company’s financial position to the potential workforce and investors.

Most of the positive internal influences found were enabled by information technology. The adoption of the IFRS was seen as a good step to revise the processes the companies had. Once companies had invested in advanced software the integration of other processes became possible as well. Companies were very pleased after getting rid of the excel consolidation. The time span of reporting has decreased a monthly basis. Furthermore, the companies have also been able to make the financial reporting process up to 50-70 % more effective. Reporting has become part of the normal everyday business life; real time information has helped the management to lead company towards its strategic vision.

The importance of the whole accounting functions has increased. People have changed their way of thinking; nowadays the accounting issues arising are taken more seriously. The respect for and the quality of numbers had increased due to the transparency. The board and CEO were seen as being more involved in accounting since more have to be written down about the business and the management’s view of the business. All in all, the IFRS financial statements are seen as a comprehensive information package; the management gets improved and easier information for their decision-making needs.

Some positive influences gained only by BGs were also presented. The improved financial information provided by the CEOs and the boards for investors have increased the credibility of financial statements. BGs may get future financing easier for their processes. The company may gain more respect when they provide high-quality financial information. BGs may benchmark the IFRS based financial information to their competitors and use this information internally to help the management in the process of making strategic decisions or externally for the public to signal the strength of the business compared to the other companies in the same area of business.

Contents
1 Introduction

1.1 Background discussion
1.2 Definitions
1.3 Research gap
1.4 Research problem
1.5 Methodology
1.6 Structure of the study

2 Analyzing the literature
2.1 Born Global concept

2.1.1 Special characteristics of BGs
2.1.3 Managerial planning of BGs

2.2 International harmonization of the financial reporting