AN ANALYSIS OF THE FACTORS AFFECTING THE IMPLEMENTATION OF CAMBODIAN FINANCIAL REPORTING STANDARD FOR NOT-FOR-PROFIT ENTITIES
Keywords:
Cambodian Financial Reporting Standard for Not-For-Profit-Entities, Logit Regression Model, Exploratory Factor Analysis, Maximum Likelihood Estimation.
Abstract
The adoption of the Cambodia Financial Reporting Standard (CFRS) for Not-For-Profit Entities (NFPEs) is crucial for both the entities themselves and the Accounting and Auditing Regulator (ACAR). Despite the large number of registered not-for-profit entities in Cambodia, not all of them have embraced the use of CFRS. This study aims to analyze the factors that influence the likelihood of adopting CFRS for NFPEs through a logit regression model. Six factors are identified, including three observed variables (entity size, fear of penalties, and ease of accessing funds) and three latent variables (valuation of accounting items, entities' readiness, and consistency with tax regulations). Data was collected from 109 entities. The empirical findings reveal that five out of the six factors are statistically significant in explaining the likelihood of entities adopting CFRS for NFPEs. However, the entities' readiness to adopt CFRS was found to be statistically insignificant. The estimated parameter values for the significant factors align with expectations. The Pseudo-R2 suggests that approximately 61.8 percent of the variation in the dependent variable can be attributed to the independent variables. It is important for not-for-profit entities and the ACAR to consider these significant factors when promoting the adoption of CFRS for NFPEs. Future research could further investigate the reasons behind the lack of significance in the entities' readiness factor and explore additional factors that may influence the likelihood of CFRS adoption.
JEL Classification Codes: M10, M40, M41, M48.
References
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Ball, R. (2016). IFRS – 10 years later. Accounting and Business Research, 46(5), 545–571. https://doi.org/10.1080/00014788.2016.1182710
Bonito, A. L. M., & Pais, C. (2018). The macroeconomic determinants of the adoption of IFRS for SMEs. Revista De Contabilidad, 21(2), 116–127. https://doi.org/10.1016/j.rcsar.2018.03.001
Borker, D. R. (2013). Is there a favorable cultural profile for IFRS?: An examination and extension of Gray’s accounting value hypothesis. International Business & Economics Research Journal (IBER), 12(2), 167–173. https://doi.org/10.19030/iber.v12i2.7629
Brüggemann, U. (2011). The economic consequences of fair value reclassifications under IFRS. In Gabler eBooks (pp. 83–131). https://doi.org/10.1007/978-3-8349-6952-1_4
Cambodia Financial Reporting Standards for Not-for Profit Entities (CFRS for NFPEs). (2018). In Accounting and Auditing Regulator. Accounting and Auditing Regulator. Retrieved February 3, 2023, from https://www.acar.gov.kh
Cascino, S., & Gassen, J. (2014). What drives the comparability effect of mandatory IFRS adoption? Review of Accounting Studies, 20(1), 242–282. https://doi.org/10.1007/s11142-014-9296-5
Council for the Development of Cambodia. (2002). Law on Accounting. Law on Corporate Accounts, Their Audit and the Accounting Profession. Retrieved June 5, 2023, from http://www.cambodiainvestment.gov.kh/law-on-accountinglaw- on-corporate-accounts-their-audit-and-the-accounting-profession_020708.html
Dauda, I. A., Ombugadu, B. A., & Aku, S. U. (2015). Threats and challenges to accounting profession: A draw back to the development of accounting practices in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(4), 96-104. https://doi.org/10.6007/ijarafms/v5-i4/1883
Djarwanto, P., & Subagyo, P. (2013). Statistika Induktif (5th ed.). BPFE-Yogyakarta.
DEBEBE, T. (2023). ASSESSMENT OF THE BENEFITS AND CHALLENGES OF ADOPTION INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR SMALL AND MEDIUM ENTERPRISE: A CASE OF SOME SELECTED SMALL AND MEDIUM ENTERPRISE COMPANIES IN BOLE SUBCITY (Doctoral dissertation, ST. MARY’S UNIVERSITY).
Faraj, S. K., & El-Firjani, E. (2014). Challenges facing IASS/IFRS implementation by Libyan Listed Companies. Universal Journal of Accounting and Finance, 2(3), 57–63. https://doi.org/10.13189/ujaf.2014.020302
Ferati, M. G., Ahmeti, S., & Aliu, M. (2021). Challenges of implementing IFRS in Kosovo. Journal of Accounting, Finance and Auditing Studies, 7(2), 1–15. https://doi.org/10.32602/jafas.2021.009
Gernon, H., & Wallace, R. S. C. (1995). International Accounting Research: A review of its ecology, contending theories and methodologies. Journal of Accounting Literature, 14(1), 54–106.
Gibru, A., & Aynalem, M. (2019). The Possible Challenges of adoption of International Financial Reporting Standards: A Qualitative Meta-analysis approach. Journal of Investment and Management, 8(6), 86. https://doi.org/10.11648/j.jim.20190806.11
Gjerde, Ø., Knivsflå, K. H., & Sættem, F. (2008). The value-relevance of adopting IFRS: Evidence from 145 NGAAP restatements. Journal of International Accounting, Auditing and Taxation, 17(2), 92–112. https://doi.org/10.1016/j.intaccaudtax.2008.07.001
Gonçalves, F. J. A., De Moura, A. A. F., & Motoki, F. Y. S. (2022). What influences the implementation of IFRS for SMEs? The Brazilian case. Accounting & Finance, 62(2), 2947-2992. https://doi.org/10.1111/acfi.12917
Gray, S. J. (1988). Towards a theory of cultural influence on the development of accounting systems internationally. Abacus, 24(1), 1–15. https://doi.org/10.1111/j.1467-6281.1988.tb00200.x
Houqe, M. N., Monem, R., & Van Zijl, T. (2016). The economic consequences of IFRS adoption: Evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40–48. https://doi.org/10.1016/j.intaccaudtax.2016.10.001
Irvine, H., & Lucas, N. (2006). The globalization of accounting standards: the case of the United Arab Emirates. In Proceedings of the 3rd International Conference on Contemporary Business (pp. 1-24). Charles Sturt University.
Jasur, S. (2023). CHALLENGES AND OPPORTUNITIES OF ADOPTION OF IFRS FOR THE ACCOUNTING PROFESSION IN UZBEKISTAN: A COMPREHENSIVE ANALYSIS. World Bulletin of Management and Law, 21, 163-166. Retrieved from https://scholarexpress.net/index.php/wbml/article/view/2590
Khan, I. U., Usman, A., & Jan, M. F. (2021). Factors Affecting IFRS Adoption in Pakistan and Its Impact on Firm Performance. Multicultural Education, 7(11), 556-580. Retrieved from http://ijdri.com/me/wp-content/uploads/2021/11/64.pdf
Mhedhbi, K., & Essid, M. (2022). National cultural dimensions and adoption of the international financial reporting standard (IFRS) for small and medium-sized entities (SMEs). The International Journal of Accounting, 57(01), 2250004. https://doi.org/10.1142/S1094406022500044
Ministry of Economy and Finance. (2009). Ministry of Economy and Finance. Retrieved May 8, 2023, from https://www.naccambodia.gov.kh/?page=&lg=en
Ministry of Economy and Finance. (2011). Ministry of Economy and Finance. Retrieved April 25, 2023, from https://www.naccambodia.gov.kh/?page=&lg=en
Mukoro, D. O., & Ojecka, S. A. (2011). The challenges of culture to international financial reporting standards (IFRS) convergence. Interdisciplinary Jounal of Contemporary Research in Business, 2(2), 914–924.
Nassar, L. M., Uwuigbe, O. R., Uwuigbe, U., & Abuwa, J. T. (2014). IFRS adoption and its integration into accounting education curriculum in Nigerian universities. Research Journal of Finance and Accounting, 5(22), 76–82.
Palea, V. (2013). IAS/IFRS and financial reporting quality: Lessons from the European experience. China Journal of Accounting Research, 6(4), 247–263. https://doi.org/10.1016/j.cjar.2013.08.003
Pietilä, M. (2017). Determinants of IFRS adoption in European SMEs [MA Thesis]. University of Vaasa.
Pricope, C. F. (2016). The role of institutional pressures in developing countries: Implications for IFRS. Theoretical and Applied Economics, 23(2), 27–40.
Sappor, P., Atta Sarpong, F., & Ahmed Seidu Seini, R. (2023). The adoption of IFRS for SMEs in the northern sector of Ghana: A case of structural equation modeling. Cogent Business & Management, 10(1), 2180840. https://doi.org/10.1080/23311975.2023.2180840
Song, X., & Trimble, M. (2022). The historical and current status of global IFRS adoption: Obstacles and opportunities for researchers. The International Journal of Accounting, 57(02), 2250001. https://doi.org/10.1142/S1094406022500019
Ta, T. T., Pham, C. D., Nguyen, A. H., Doan, N. T., Dinh, H. T., Hoang, G., & Pham, T. H. (2021). Factors affecting the adoption of IFRS: the case of listed companies on Ho Chi Minh Stock Exchange. Journal of Asian Finance, Economics and Business, 8(2), 873–882. https://doi.org/10.13106/jafeb.2021.vol8.no2.0873
Taiwo, F. H., & Adejare, A. T. (2014). Empirical analysis of the effect of international financial reporting standards (IFRS) adoption on accounting practices in Nigeria. Archives of Business Research, 2(2), 01-14.
Tlemsani, I., Mohamed Hashim, M. A., & Matthews, R. (2023). The impact of IFRS adoption on Saudi Arabia. Journal of Islamic Accounting and Business Research. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-11-2022-0304
Uwalomwa, U., Emenim, F. K., Uwuigbe, O. R., & Oyeleke, O. I. (2016). Mandatory international financial reporting standards adoption and cost of equity capital in Nigeria. EuroEconomica, 35(1), 92–102.
WALI, Y. (2022). ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) IN NIGERIA: PROSPECTS AND CHALLENGES. International Journal of Entrepreneurship and Forensic Management Research, 1(1), 92-111. Retrieved from https://nightingalepublications.com/index.php/nijefmr/article/view/51
Zakari, M. A. (2013). Accounting and auditing in developing countries - Arab countries. Journal of Economics and Political Sciences, 16(10), 1–27.
Zakari, M. A. (2014). Challenges of International Financial Reporting Standards (IFRS) adoption in Libya. International Journal of Accounting and Financial Reporting, 4(2), 390-412. https://doi.org/10.5296/ijafr.v4i2.6302
Zéghal, D., & Mhedhbi, K. (2006). An analysis of the factors affecting the adoption of international accounting standards by developing countries. The International Journal of Accounting, 41(4), 373–386. https://doi.org/10.1016/j.intacc.2006.09.009
Alhato, O. (2023). THE EXPECTED BENEFITS AND CHALLENGES OF THE INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS) TRANSITION IN DEVELOPING COUNTRIES (CASE OF JORDAN). Annals of'Constantin Brancusi'University of Targu-Jiu. Economy Series/Analele Universităţii'Constantin Brâncuşi'din Târgu-Jiu Seria Economie, (3).
Ball, R. (2016). IFRS – 10 years later. Accounting and Business Research, 46(5), 545–571. https://doi.org/10.1080/00014788.2016.1182710
Bonito, A. L. M., & Pais, C. (2018). The macroeconomic determinants of the adoption of IFRS for SMEs. Revista De Contabilidad, 21(2), 116–127. https://doi.org/10.1016/j.rcsar.2018.03.001
Borker, D. R. (2013). Is there a favorable cultural profile for IFRS?: An examination and extension of Gray’s accounting value hypothesis. International Business & Economics Research Journal (IBER), 12(2), 167–173. https://doi.org/10.19030/iber.v12i2.7629
Brüggemann, U. (2011). The economic consequences of fair value reclassifications under IFRS. In Gabler eBooks (pp. 83–131). https://doi.org/10.1007/978-3-8349-6952-1_4
Cambodia Financial Reporting Standards for Not-for Profit Entities (CFRS for NFPEs). (2018). In Accounting and Auditing Regulator. Accounting and Auditing Regulator. Retrieved February 3, 2023, from https://www.acar.gov.kh
Cascino, S., & Gassen, J. (2014). What drives the comparability effect of mandatory IFRS adoption? Review of Accounting Studies, 20(1), 242–282. https://doi.org/10.1007/s11142-014-9296-5
Council for the Development of Cambodia. (2002). Law on Accounting. Law on Corporate Accounts, Their Audit and the Accounting Profession. Retrieved June 5, 2023, from http://www.cambodiainvestment.gov.kh/law-on-accountinglaw- on-corporate-accounts-their-audit-and-the-accounting-profession_020708.html
Dauda, I. A., Ombugadu, B. A., & Aku, S. U. (2015). Threats and challenges to accounting profession: A draw back to the development of accounting practices in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(4), 96-104. https://doi.org/10.6007/ijarafms/v5-i4/1883
Djarwanto, P., & Subagyo, P. (2013). Statistika Induktif (5th ed.). BPFE-Yogyakarta.
DEBEBE, T. (2023). ASSESSMENT OF THE BENEFITS AND CHALLENGES OF ADOPTION INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR SMALL AND MEDIUM ENTERPRISE: A CASE OF SOME SELECTED SMALL AND MEDIUM ENTERPRISE COMPANIES IN BOLE SUBCITY (Doctoral dissertation, ST. MARY’S UNIVERSITY).
Faraj, S. K., & El-Firjani, E. (2014). Challenges facing IASS/IFRS implementation by Libyan Listed Companies. Universal Journal of Accounting and Finance, 2(3), 57–63. https://doi.org/10.13189/ujaf.2014.020302
Ferati, M. G., Ahmeti, S., & Aliu, M. (2021). Challenges of implementing IFRS in Kosovo. Journal of Accounting, Finance and Auditing Studies, 7(2), 1–15. https://doi.org/10.32602/jafas.2021.009
Gernon, H., & Wallace, R. S. C. (1995). International Accounting Research: A review of its ecology, contending theories and methodologies. Journal of Accounting Literature, 14(1), 54–106.
Gibru, A., & Aynalem, M. (2019). The Possible Challenges of adoption of International Financial Reporting Standards: A Qualitative Meta-analysis approach. Journal of Investment and Management, 8(6), 86. https://doi.org/10.11648/j.jim.20190806.11
Gjerde, Ø., Knivsflå, K. H., & Sættem, F. (2008). The value-relevance of adopting IFRS: Evidence from 145 NGAAP restatements. Journal of International Accounting, Auditing and Taxation, 17(2), 92–112. https://doi.org/10.1016/j.intaccaudtax.2008.07.001
Gonçalves, F. J. A., De Moura, A. A. F., & Motoki, F. Y. S. (2022). What influences the implementation of IFRS for SMEs? The Brazilian case. Accounting & Finance, 62(2), 2947-2992. https://doi.org/10.1111/acfi.12917
Gray, S. J. (1988). Towards a theory of cultural influence on the development of accounting systems internationally. Abacus, 24(1), 1–15. https://doi.org/10.1111/j.1467-6281.1988.tb00200.x
Houqe, M. N., Monem, R., & Van Zijl, T. (2016). The economic consequences of IFRS adoption: Evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40–48. https://doi.org/10.1016/j.intaccaudtax.2016.10.001
Irvine, H., & Lucas, N. (2006). The globalization of accounting standards: the case of the United Arab Emirates. In Proceedings of the 3rd International Conference on Contemporary Business (pp. 1-24). Charles Sturt University.
Jasur, S. (2023). CHALLENGES AND OPPORTUNITIES OF ADOPTION OF IFRS FOR THE ACCOUNTING PROFESSION IN UZBEKISTAN: A COMPREHENSIVE ANALYSIS. World Bulletin of Management and Law, 21, 163-166. Retrieved from https://scholarexpress.net/index.php/wbml/article/view/2590
Khan, I. U., Usman, A., & Jan, M. F. (2021). Factors Affecting IFRS Adoption in Pakistan and Its Impact on Firm Performance. Multicultural Education, 7(11), 556-580. Retrieved from http://ijdri.com/me/wp-content/uploads/2021/11/64.pdf
Mhedhbi, K., & Essid, M. (2022). National cultural dimensions and adoption of the international financial reporting standard (IFRS) for small and medium-sized entities (SMEs). The International Journal of Accounting, 57(01), 2250004. https://doi.org/10.1142/S1094406022500044
Ministry of Economy and Finance. (2009). Ministry of Economy and Finance. Retrieved May 8, 2023, from https://www.naccambodia.gov.kh/?page=&lg=en
Ministry of Economy and Finance. (2011). Ministry of Economy and Finance. Retrieved April 25, 2023, from https://www.naccambodia.gov.kh/?page=&lg=en
Mukoro, D. O., & Ojecka, S. A. (2011). The challenges of culture to international financial reporting standards (IFRS) convergence. Interdisciplinary Jounal of Contemporary Research in Business, 2(2), 914–924.
Nassar, L. M., Uwuigbe, O. R., Uwuigbe, U., & Abuwa, J. T. (2014). IFRS adoption and its integration into accounting education curriculum in Nigerian universities. Research Journal of Finance and Accounting, 5(22), 76–82.
Palea, V. (2013). IAS/IFRS and financial reporting quality: Lessons from the European experience. China Journal of Accounting Research, 6(4), 247–263. https://doi.org/10.1016/j.cjar.2013.08.003
Pietilä, M. (2017). Determinants of IFRS adoption in European SMEs [MA Thesis]. University of Vaasa.
Pricope, C. F. (2016). The role of institutional pressures in developing countries: Implications for IFRS. Theoretical and Applied Economics, 23(2), 27–40.
Sappor, P., Atta Sarpong, F., & Ahmed Seidu Seini, R. (2023). The adoption of IFRS for SMEs in the northern sector of Ghana: A case of structural equation modeling. Cogent Business & Management, 10(1), 2180840. https://doi.org/10.1080/23311975.2023.2180840
Song, X., & Trimble, M. (2022). The historical and current status of global IFRS adoption: Obstacles and opportunities for researchers. The International Journal of Accounting, 57(02), 2250001. https://doi.org/10.1142/S1094406022500019
Ta, T. T., Pham, C. D., Nguyen, A. H., Doan, N. T., Dinh, H. T., Hoang, G., & Pham, T. H. (2021). Factors affecting the adoption of IFRS: the case of listed companies on Ho Chi Minh Stock Exchange. Journal of Asian Finance, Economics and Business, 8(2), 873–882. https://doi.org/10.13106/jafeb.2021.vol8.no2.0873
Taiwo, F. H., & Adejare, A. T. (2014). Empirical analysis of the effect of international financial reporting standards (IFRS) adoption on accounting practices in Nigeria. Archives of Business Research, 2(2), 01-14.
Tlemsani, I., Mohamed Hashim, M. A., & Matthews, R. (2023). The impact of IFRS adoption on Saudi Arabia. Journal of Islamic Accounting and Business Research. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-11-2022-0304
Uwalomwa, U., Emenim, F. K., Uwuigbe, O. R., & Oyeleke, O. I. (2016). Mandatory international financial reporting standards adoption and cost of equity capital in Nigeria. EuroEconomica, 35(1), 92–102.
WALI, Y. (2022). ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) IN NIGERIA: PROSPECTS AND CHALLENGES. International Journal of Entrepreneurship and Forensic Management Research, 1(1), 92-111. Retrieved from https://nightingalepublications.com/index.php/nijefmr/article/view/51
Zakari, M. A. (2013). Accounting and auditing in developing countries - Arab countries. Journal of Economics and Political Sciences, 16(10), 1–27.
Zakari, M. A. (2014). Challenges of International Financial Reporting Standards (IFRS) adoption in Libya. International Journal of Accounting and Financial Reporting, 4(2), 390-412. https://doi.org/10.5296/ijafr.v4i2.6302
Zéghal, D., & Mhedhbi, K. (2006). An analysis of the factors affecting the adoption of international accounting standards by developing countries. The International Journal of Accounting, 41(4), 373–386. https://doi.org/10.1016/j.intacc.2006.09.009
Published
2023-12-03
How to Cite
Lim, S., & Flores, E. P. (2023). AN ANALYSIS OF THE FACTORS AFFECTING THE IMPLEMENTATION OF CAMBODIAN FINANCIAL REPORTING STANDARD FOR NOT-FOR-PROFIT ENTITIES. International Journal of Accounting & Finance Review, 14(2), 37-47. https://doi.org/10.46281/ijafr.v14i2.2133
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2023 Siphat Lim, Edman Padilla Flores
This work is licensed under a Creative Commons Attribution 4.0 International License.
