Literature Review on IFRS Impact to Sri Lanka

In this section, we provide a brief overview of the theoretical and the empirical literature on the implementation of IAS 41. The literature focusing on these aspects is extremely rich. Some studies have analyzed the impact of implementing IAS 41 in only one country (Koiv et al., 2001 on Estonia; Grege- Staltmane, 2010 on Latvia; Argilés et al., 2009 on Spain; Burnside, Schiller, 2005 on Sweden). Other papers are multicounty studies (Elad, Herbohn, 2011, PricewaterhouseCoopers, 2009, Herbohn, Herbohn, 2006). In addition, some studies analyze the effects of the implementation of IAS 41 on the agricultural sector as a whole (Elad, 2004, Lefter, Roman, 2007, Mateş, Grosu, 2008) and others consider various agricultural industries: forestry (Svensson et al., 2008, Jansson, Fagerström, 2011); farm (Argilés, Slof 2001, Visberg, Parts, 2002); wine (Booth, Walker, 2001); animal husbandry (Aldea (Romanescu), 2009). The thematic approach is also different. Some studies investigate the implications IAS 41 has over the harmonization of international accounting standards. Thus, Elad (2004, p. 633) argues that through a radical departure from historical costs, the standard causes some theoretical and practical problems that might affect its widespread adoption. Moreover, it is not only incompatible with francophone countries accounting models but raises major problems of implementation in different national settings. Other studies analyze the ideological role that IAS 41 plays in legitimating social conflict in the context of companies being compelled to adopt the fair value evaluation model (Elad, 2007) or highlight the increased volatility, manipulation and subjectivity of reported earnings under this standard (Herbohn, Herbohn, 2006, Penttinen et al., 2004, Dowling, Godfrey, 2001). The problem is that the IAS 41 has generalized fair value assessment for all biological assets although not all of these assets are designated for capital appreciation or sold, which leads to a misleading information (Aryanto, 2011, p. 4). In addition, there are several models to determine fair value. The use of different assessment models leads to differences of earnings quality in agricultural sector internationally (Elad, Herbohn, 2011, p. 9). Interviews conducted in the agricultural companies have shown that IAS 41 demands a lot of extra work and it is hard to establish the fair value (Burnside, Schiller, 2005, p. 34, Elad, Herbohn, 2011, p. 88). Even though most studies are positioned against the requirement of IAS 41 to assess the biological assets to their fair value, there are also supporters of this treatment. Thus, Argilés & Slof (2001, p. 22) points out that the generalization of this model is good for small family farms that do not have the resources and skills to calculate their costs. Barlev & Haddad (2003, p. 383) argues that fair value accounting also provides a complete full disclosure and it is compatible with transparency. In other words, the fair value entails a more consistent valuation method, as well as a more reliable and comparable source of information (Argilés et al., 2009, p. 16)