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his paper examines the decision of 120 countries to permit or not to permit the use of International Financial Reporting Standards (IFRS) for listed companies incorporated within their borders. An empirical model is developed considering variables related to culture, political systems and economic systems of the countries. Least squares regression was used to examine which variables significantly influence the decision to allow the use of IFRS. The results from this regression indicate that literacy rates and net import activity positively influence the decision to allow IFRS. Less economically developed countries were also shown to be more likely to allow IFRS. A model using these three variables was used to predict whether countries would allow IFRS. The model was able to statistically improve on the prediction that all countries would use IFRS.


This article first appeared in the 2009 issue of Journal for Global Business Advancement, and is reprinted with permission.

©2009 Inderscience Enterprises Ltd.