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The Effect of the German Accounting Law Modernization Act on the Comparability of Private Local GAAP and IFRS Firms

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  • Christian Gross

    (University of Graz)

Abstract

One of the Accounting Law Modernization Act’s aims was to provide a long-lasting, lower-cost, easier, and full-fledged alternative to IFRS for private firms. While the comparability of accounting rules (i. e., the de jure comparability) between German GAAP (HGB) and IFRS increased as a result of this reform, related research indicates that reporting incentives play an important role in shaping reporting practices (i. e., de facto comparability). With heterogeneous incentives being present, it remains questionable whether de facto comparability between HGB and IFRS firms followed the increase in de jure comparability. Using consolidated accounts of private firms voluntarily reporting under IFRS together with variations of matched HGB reports and output-based comparability measures in a pre-post design including firm years from 2003 to 2011, I find that the de facto comparability between private HGB and IFRS firms increases (decreases) from the pre- to the post-BilMoG period for matched firm pairs belonging to similar (dissimilar) industries.

Suggested Citation

  • Christian Gross, 2016. "The Effect of the German Accounting Law Modernization Act on the Comparability of Private Local GAAP and IFRS Firms," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 423-460, December.
    • Handle: RePEc:spr:schmbr:v:17:y:2016:i:3:d:10.1007_s41464-016-0011-x
    DOI: 10.1007/s41464-016-0011-x
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    2. Julia Zicke & Florian Kiy, 2017. "The effects of accounting standards on the financial reporting properties of private firms: evidence from the German Accounting Law Modernization Act," Business Research, Springer;German Academic Association for Business Research, vol. 10(2), pages 215-248, October.

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