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The Impact of Different Accounting Reporting Methods on the Informativeness of Research and Development Costs: IFRS Compared to U.S. GAAP

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  • Michael T. Dugan

    (Knox School of Accountancy, Augusta University, Augusta, USA)

  • John E. McEldowney

    (Department of Accounting & Finance, University of North Florida, Florida, USA)

  • Elizabeth H. Turner

    (Department of Accounting, University of Texas Rio Grande Valley, USA)

  • Clark M. Wheatley

    (School of Accounting, Florida International University, Florida, USA)

Abstract

In this paper, we examine the information content and value relevance of research and development (R&D) costs before and after the SEC eliminated the 20-F reconciliation to U.S. GAAP for Foreign Public Issuers (FPIs). Prior to the elimination both FPIs and U.S. firms experienced an increase in the indirect effect of R&D on operating income. After the requirement was eliminated, the direct effect increased for FPIs and the indirect effect decreased. This is in contrast to U.S. firms who experienced a continued increase in the indirect effect. This shift indicates there was a loss of informativeness in the R&D disclosures for FPIs.

Suggested Citation

  • Michael T. Dugan & John E. McEldowney & Elizabeth H. Turner & Clark M. Wheatley, 2016. "The Impact of Different Accounting Reporting Methods on the Informativeness of Research and Development Costs: IFRS Compared to U.S. GAAP," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-36, December.
    • Handle: RePEc:wsi:rpbfmp:v:19:y:2016:i:04:n:s0219091516500259
    DOI: 10.1142/S0219091516500259
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    1. Mazzi, Francesco & Slack, Richard & Tsalavoutas, Ioannis & Tsoligkas, Fanis, 2019. "Country-level corruption and accounting choice: Research & development capitalization under IFRS," The British Accounting Review, Elsevier, vol. 51(5).
    2. Lin Tian & Liang Han & Biao Mi, 2020. "Bank competition, information specialization and innovation," Review of Quantitative Finance and Accounting, Springer, vol. 54(3), pages 1011-1035, April.

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