Contextual Issues Affecting the Adoption of International Financial Reporting Standards (IFRS) in A Developing Country

The Case of Bhutan

Abstract

The objective of this paper is to demonstrate that accounting standards and financial reporting practices are deeply influenced by country-specific contextual factors, and these factors must not be overlooked when considering the adoption of International Financial Reporting Standards (IFRS).

This qualitative study is a critical examination of the Bhutanese accounting environment and raises concerns related to the adoption of IFRS by applying the accounting ecology framework. The study presents evidence that the contextual disparities between Bhutan and the countries where IFRSs have been developed pose challenges for the seamless transition and successful implementation of IFRS in Bhutan.

Several characteristics of the Bhutanese accounting environment, such as cultural differences, an underdeveloped capital market, the impact of accounting-related laws on financial reporting, an emerging accounting profession, and the absence of a professional accounting organization, act as obstacles to the smooth transition and consistent application and interpretation of IFRS in Bhutan.