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The Disclosure of Non-GAAP Performance Measures and the Adoption of IFRS: Evidence from Japanese Firms' Experience

Author

Listed:
  • Yuta Shibasaki

    (Associate Director, Institute for Monetary and Economic Studies (currently, International Department), Bank of Japan (E-mail: yuuta.shibasaki@boj.or.jp))

  • Chikara Toyokura

    (Director, Head of Accounting Studies Group, Institute for Monetary and Economic Studies (currently, Chief Representative in Hong Kong), Bank of Japan(E-mail: chikara.toyokura@boj.or.jp))

Abstract

We investigate whether and how Japanese firms' non-GAAP disclosure practices change when they adopt International Financial Reporting Standards (IFRS). We find that the likelihood that firms disclose non-GAAP performance measures outside financial statements increases after they have adopted IFRS. This is consistent with the view that the proliferation of non-GAAP performance measures is, in part, attributable to the nature of the current IFRS presentation requirements for financial statements. We also show that the exclusion of non- recurring items to arrive at non-GAAP performance measures becomes more common only after firms have adopted IFRS. This finding indicates that many managers regard separating out unusual or infrequently occurring items as important. The practice corresponds to financial statement users' calls for such separation. We also show how the proposed introduction of several subtotals in statements of financial performance by the International Accounting Standards Board (IASB) under the Primary Financial Statements project will improve the comparability and usefulness of financial statements of Japanese firms that have adopted IFRS. These results provide important empirical evidence at a time when the IASB is developing new presentation requirements for statements of financial performance.

Suggested Citation

  • Yuta Shibasaki & Chikara Toyokura, 2020. "The Disclosure of Non-GAAP Performance Measures and the Adoption of IFRS: Evidence from Japanese Firms' Experience," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 38, pages 19-54, November.
  • Handle: RePEc:ime:imemes:v:38:y:2020:p:19-54
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    References listed on IDEAS

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    More about this item

    Keywords

    Non-GAAP performance measures; IFRS; Primary Financial Statements project;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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