| Summary: | As part of the major international developments on
financial reporting and auditing, the International Financial
Reporting Standards (IFRS), which are now applied in
many countries around the world, are creating an
international harmonization and a common language for
financial reporting and accounting between firms that apply
and report in accordance to these standards. This paper
empirically tests whether adoption of IFRS in developing
and transitional Kosovo, has impact on bank`s loan terms
and conditions for companies that are mandatory adopters
of IFRSs. To test the hypothesis, the authors analyzed the
opinions of the banking sector and of companies that are
mandatory adopters of IFRSs in Kosovo. The research
results suggest that the adoption of IFRSs in Kosovo has
impact on interest rates offered by banks to mandatory
adopters, as well as on non-financial loan terms such as:
loan time limits, mortgage requirements, lower
administrative costs and renegotiating loan terms.
Mandatory IFRS adopters have a better loan rating
compared to other companies in Kosovo and the
percentage of non-performing loans is lower for mandatory
IFRS adopters in Kosovo. Based on this research, the aim
is to demonstrate to policy makers and other stakeholders
that only the mere implementation of high quality financial
reporting standards, such as IFRSs, is not sufficient to
improve the quality of accounting and financial reporting in
Kosovo, especially since there are no institutional
mechanisms to empower the implementation of IFRSs. For
companies in Kosovo receiving better loan terms from
banks can be an incentive to improve their financial
reporting systems, but the focus is also on other benefits
that should be considered as well.
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