We investigate whether the adoption of IFRS increases the value relevance of accounting information for firms listed on the Australian Securities Exchange. Using a longitudinal study that covers pre-IFRS and post-IFRS periods during 1990-2008, we find that the combined relevance of book value of equity and earnings alters little with IFRS adoption. However, earnings become more value relevant whereas the book value of equity does not. This impact is concentrated in the sub-samples of large firms and firms that reported accounting information differences upon IFRS adoption. Consistent with an increase in the value relevance of earnings, earnings also become more persistent around IFRS adoption. Our study suggests that even for a country categorised by strong investor protection and high quality financial reporting and enforcement, IFRS adoption affects the associations between accounting information and market value.
Countries in Central and Eastern Europe (CEE), most of them former components of the communist bloc, have suffered diverse influences over time. Historically, the advent of communism in the 1950s has stopped the economic and political development of these countries. Its fall during the late 1980s and early 1990s triggered severe changes in the economic and social environment, with profound consequences on the countries' accounting and business models. The accounting regulatory process of these countries has mostly been a public one, although some countries also involved private sector and professional bodies. With economic and political reforms these countries are now reforming their accounting systems with for example the adoption of International Accounting Standards/International Financial Reporting Standards (IFRS). Additionally, the CEE countries' political will to join the European Union compelled the regulators to ensure a high level of harmonization with the European Directives. This volume present theoretical and empirical papers that will further our understanding of accounting issues in CEE countries.
We investigate whether the nature of differences between national GAAP and IFRS is associated with differential changes in the value relevance of Ramp;D expenses after the adoption of IFRS across countries. Using a difference-in-differences study on a sample of public companies in nine countries that covers pre-IFRS and post-IFRS periods during 1997-2012, we find that the value relevance of Ramp;D expenses declines after IFRS adoption in countries that previously mandated immediate expensing or allowed optional capitalization of Ramp;D costs. On the contrary, there is no change in the value relevance of Ramp;D expenses for countries that switched from the mandatory capitalization rule to IFRS. We also investigate the moderating effects of national institutions on the changes in the value relevance of Ramp;D expenses after IFRS adoption. We find that in countries with stronger investor protection, the changes in the value relevance of Ramp;D expenses are larger. In addition, changes in the value relevance of Ramp;D expenses are smaller for countries whose national culture is characterized by higher uncertainty avoidance. Our findings highlight the importance of both accounting standards and national institutions in explaining the changes in the value relevance of accounting information after IFRS adoption.
It is often necessary for social scientists to study differences in groups, such as gender or race differences in attitudes, buying behavior, or socioeconomic characteristics. When the researcher seeks to estimate group differences through the use of independent variables that are qualitative, dummy variables allow the researcher to represent information about group membership in quantitative terms without imposing unrealistic measurement assumptions on the categorical variables. Beginning with the simplest model, Hardy probes the use of dummy variable regression in increasingly complex specifications, exploring issues such as: interaction, heteroscedasticity, multiple comparisons and significance testing, the use of effects or contrast coding, testing for curvilinearity, and estimating a piecewise linear regression.
While there is growing interest in IFRS within the US, interest outside the US has exploded. Weygandt's fourth edition of Financial Accounting: IFRS highlights the integration of more US GAAP rules, a desired feature as more foreign companies find the United States to be their largest market. The highly anticipated new edition retains each of the key features (e.g. TOC, writing style, pedagogy, robust EOC) on which users of Weygandt Financial have come to rely, while putting the focus on international companies/examples, discussing financial accounting principles and procedures within the context of IFRS, and providing EOC exercises and problems that present students with foreign currency examples instead of solely U.S. dollars.
We have spent a great deal of time on the continued development of accounting and auditing standards, which are used as a primary component of corporate reporting, to reach today's financial reporting framework. However, is it possible to say that, currently, financial statements provide full and prompt disclosure? Or will they still be useful as a primary element with their current structures in corporate reporting? Undoubtedly, we are deeply concerned about these issues in recent times. This volume contains chapters to discuss the today's and tomorrow's accounting and corporate reporting phenomena in a comprehensive and multidimensional way. Therefore, this book is organized into six sections: "Achieving Sustainability through Corporate Reporting", "International Standardization", "Financial Reporting Quality", "Accounting Profession and Behavioral Aspects", "Public Sector Accounting and Reporting", and "Managerial Accounting".
This study examines the impact of adopting International Financial Reporting Standards (IFRS) and the prior and superseded International Accounting Standards (IAS) on investor returns, the level of earnings management and the value relevance of accounting information in African capital markets. This study is motivated by the growing momentum of African countries adopting International Financial Reporting Standards (IFRS) for listed, cross listed or even unlisted companies. Prior to the adoption of IFRS, a high level of diversity existed in accounting standards between African countries. These differences consisted of the number of promulgated standards, conservatism of these standards, their completeness for potential accounting transactions, depth and guidelines on allowable measurement methods and disclosure requirements. First, this study empirically examines whether IFRS adoption has impacted investor returns through the informativeness of reported earnings and secondly, whether the level of discretionary earnings management as determined by several models and proxies has declined from the IFRS adoption. Thirdly, this study examines the changes in value relevance of accounting information from the migration to IFRS. This study finds significantly higher informativeness of reported earnings under IFRS for investor returns compared to earnings per share (EPS) reporting under local GAAP after controlling for confounding factors. This provides evidence for the valuation impact of IFRS adoption. Furthermore, this study finds evidence of significantly lower earnings management by firms using IFRS compared to firms utilizing local GAAP's. This lower earnings management by IFRS reporting firms is observed for both the use of discretionary accruals to manage earnings upwards and earnings smoothing. On the value relevance of financial statements, this study first, finds that accounting reports are value relevant in all African markets examined. In addition, IFRS adopted countries and those harmonizing closely with IFRS are found to have the highest value relevance. Furthermore, test of difference in value relevance in South Africa between IFRS and South African GAAP reporting firms shows significantly higher value relevance for IFRS accounting information. -- Abstract.
