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Mandatory IFRS adoption and accounting comparability

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  • Stefano Cascino
  • Joachim Gassen

Abstract

The adoption of IFRS by many countries worldwide fuels the expectation that financial accounting might become more comparable across countries. This expectation is opposed to an alternative view that stresses the importance of incentives in shaping accounting information. We provide early evidence on this debate by investigating the effects of mandatory IFRS adoption on the comparability of financial accounting information around the world. Our results suggest that while mandatory adoption of IFRS increases the comparability of some prominent balance sheet line items across countries, it has no clear effect on the cross-country comparability of earnings attributes. To provide a rationale for these mixed findings, we investigate the IFRS measurement and disclosure compliance choices for a hand-collected sample of German and Italian firms. We find that predictable country-, region-, and firm-level incentives continue to shape the outcome of the financial reporting process and thus limit the crosssectional comparability of financial accounting information. Overall, our results suggest that the mandatory adoption of IFRS has a limited impact on accounting comparability and that accounting information continues to be shaped by both reporting standards and incentives.

Suggested Citation

  • Stefano Cascino & Joachim Gassen, 2010. "Mandatory IFRS adoption and accounting comparability," SFB 649 Discussion Papers SFB649DP2010-046, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2010-046
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2010-046.pdf
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    References listed on IDEAS

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    1. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    2. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
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    Cited by:

    1. Gatluak Gach Chuol Thony & Anthony Duku Peter, 2023. "The Impact of Adoption of International Financial Reporting Standard on Quality of Accounting Information in South Sudan: A Case Study of Kenya Commercial Bank and Cooperative Bank," International Journal of Science and Business, IJSAB International, vol. 19(1), pages 28-48.
    2. Costanza Fabio, 2018. "Voluntary application of IFRS by unlisted companies: evidence from the Italian context," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 15(2), pages 73-86, May.
    3. Philip Brown, 2011. "International Financial Reporting Standards: what are the benefits?," Accounting and Business Research, Taylor & Francis Journals, vol. 41(3), pages 269-285, August.
    4. Paul André & Peter Walton & Dan Yang, 2012. "Voluntary adoption of IFRS: A study of determinants for UK unlisted firms," Post-Print hal-00935013, HAL.
    5. Galina Sabcheva, 2018. "Trends on port concession disclosures in concessionaire financial statements in Bulgaria," Economics and computer science, Publishing house "Knowledge and business" Varna, issue 2, pages 54-66.
    6. Abbas Ali Daryaei & Yasin Fattahi & Davood Askarany & Saeed Askary & Mahdad Mollazamani, 2022. "Accounting Comparability, Conservatism, Executive Compensation-Performance, and Information Quality," JRFM, MDPI, vol. 15(11), pages 1-28, October.
    7. Myung-Gun Lee & Minjung Kang & Ho-Young Lee & Jong Chool Park, 2016. "Related-party transactions and financial statement comparability: evidence from South Korea," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 23(2), pages 224-252, June.

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    More about this item

    Keywords

    international accounting; IFRS; comparability; accounting harmonization; earnings attributes; disclosure determinants; accounting incentives;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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