Accounting Harmonization and Compliance in Applying IASB Standards: An Empirical Survey about the First Time Adoption of IAS 7 by Italian Listed Groups

This paper deals with the First Time Adoption (FTA) of International Accounting Standards Board (IASB) standards by Italian entities, focusing on the cash flow statement (CFS) whose rules are stated by International Accounting Standards 7 (IAS 7). The purpose of this paper is to investigate both the degree of harmonization and compliance in applying IAS 7. To achieve this purpose, the research has been developed by analyzing a sample of 101 financial statements of Italian listed groups issued with reference to 2005. The results of this research show a high degree of heterogeneity in applying IASB standards and a high degree of noncompliance with IAS 7 by Italian groups. The high degree of heterogeneity could impair the comparability of financial statements across entities, requiring further efforts by IASB to reduce options permitted in its standards. The high degree of noncompliance creates the risk of misleading users who read audited financial statements thinking they are prepared according to IASB standards.