IDEAS home Printed from https://ideas.repec.org/a/eee/jiaata/v38y2020ics106195182030001x.html
   My bibliography  Save this article

Did the switch to IFRS 11 for joint ventures affect the value relevance of corporate consolidated financial statements? Evidence from France and Italy

Author

Listed:
  • Gavana, Giovanna
  • Gottardo, Pietro
  • Moisello, Anna Maria

Abstract

We investigate the effects of the adoption of International Financial Reporting Standard (IFRS) 11, Joint Arrangements. In so doing, we analyze whether the removal of the proportionate consolidation option and the mandatory use of the equity method in reporting for joint ventures influences the value relevance of co-venturers’ total assets and liabilities. In a reverse situation, i.e. the elimination of the equity method, Richardson, Roubi, and Soonawalla (2012) found a decline in the value relevance of the aforementioned amounts for firms forced to change reporting method, partially offset by the value relevance of joint venture data disclosure. We focus on a continental European setting and analyze a sample of 120 Italian and French non-financial listed firms over the period 2008–2015. We find a reduction in the value relevance of co-venturers’ total assets and liabilities for companies obliged to move from proportionate consolidation to the equity method. Conversely, we do not find an increase in the value relevance of joint venture disaggregated data provided in the notes.

Suggested Citation

  • Gavana, Giovanna & Gottardo, Pietro & Moisello, Anna Maria, 2020. "Did the switch to IFRS 11 for joint ventures affect the value relevance of corporate consolidated financial statements? Evidence from France and Italy," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:jiaata:v:38:y:2020:i:c:s106195182030001x
    DOI: 10.1016/j.intaccaudtax.2020.100300
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S106195182030001X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intaccaudtax.2020.100300?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Isabel Costa Lourenco & Jose Dias Curto, 2010. "Determinants of the Accounting Choice between Alternative Reporting Methods for Interests in Jointly Controlled Entities," European Accounting Review, Taylor & Francis Journals, vol. 19(4), pages 739-773.
    2. Mian, Shehzad L. & Smith, Clifford Jr., 1990. "Incentives for unconsolidated financial reporting," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 141-171, January.
    3. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 467-498, June.
    4. Lim, Chee Yeow & Yeo, Gillian H. H. & Liu, Chao-Shin, 2003. "Information asymmetry and accounting disclosures for joint ventures," The International Journal of Accounting, Elsevier, vol. 38(1), pages 23-39.
    5. Kothavala, Kazbi, 2003. "Proportional consolidation versus the equity method: A risk measurement perspective on reporting interests in joint ventures," Journal of Accounting and Public Policy, Elsevier, vol. 22(6), pages 517-538.
    6. Stefano Azzali & Luca Fornaciari & Caterina Pesci, 2011. "The Value Relevance Of The Performance Of Listed Italian Companies Following The Introduction Of The Ias/Ifrs," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 2011, pages 3-18, july.
    7. John O'Hanlon & Paul Taylor, 2007. "The value relevance of disclosures of liabilities of equity‐accounted investees: UK evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 37(4), pages 267-284.
    8. Kazbi Soonawalla, 2006. "Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3‐4), pages 395-417, April.
    9. Whittred, Greg, 1987. "The derived demand for consolidated financial reporting," Journal of Accounting and Economics, Elsevier, vol. 9(3), pages 259-285, December.
    10. Oliver N. Okafor & Mark Anderson & Hussein Warsame, 2016. "IFRS and value relevance: evidence based on Canadian adoption," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(2), pages 136-160, April.
    11. Roger C. Graham & Craig E. Lefanowicz & Kathy R. Petroni, 2003. "The Value Relevance of Equity Method Fair Value Disclosures," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30, pages 1065-1088.
    12. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    13. Christopher Nobes, 2011. "IFRS Practices and the Persistence of Accounting System Classification," Abacus, Accounting Foundation, University of Sydney, vol. 47(3), pages 267-283, September.
    14. Clarkson, Peter & Hanna, J. Douglas & Richardson, Gordon D. & Thompson, Rex, 2011. "The impact of IFRS adoption on the value relevance of book value and earnings," Journal of Contemporary Accounting and Economics, Elsevier, vol. 7(1), pages 1-17.
    15. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    16. Whittred, Greg & Zimmer, Ian, 1994. "Contracting cost determinants of GAAP for joint ventures in an unregulated environment," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 95-111, January.
    17. Jean‐Francois Hennart, 1988. "A transaction costs theory of equity joint ventures," Strategic Management Journal, Wiley Blackwell, vol. 9(4), pages 361-374, July.
    18. Pierre Dussauge & Bernard Garrette & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 99-126, February.
    19. A. William Richardson & Raafat R. Roubi & Kazbi Soonawalla, 2012. "Decline in Financial Reporting for Joint Ventures? Canadian Evidence on Removal of Financial Reporting Choice," European Accounting Review, Taylor & Francis Journals, vol. 21(2), pages 373-393, August.
    20. Ali, A & Hwang, LS, 2000. "Country-specific factors related to financial reporting and the value relevance of accounting data," Journal of Accounting Research, Wiley Blackwell, vol. 38(1), pages 1-21.
    21. Lee, Myoung-jae, 2016. "Matching, Regression Discontinuity, Difference in Differences, and Beyond," OUP Catalogue, Oxford University Press, number 9780190258740.
    22. Palea, Vera, 2013. "IAS/IFRS and Financial Reporting Quality: Lessons from the European Experience," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201330, University of Turin.
    23. Francis, J & Schipper, K, 1999. "Have financial statements lost their relevance?," Journal of Accounting Research, Wiley Blackwell, vol. 37(2), pages 319-352.
    24. Roger C. Graham & Craig E. Lefanowicz & Kathy R. Petroni, 2003. "The Value Relevance of Equity Method Fair Value Disclosures," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1065-1088, September.
    25. Chiara Saccon & Åžtefana Maria Dima, 2015. "Financial reporting for joint ventures and capital markets reactions," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 9(2), pages 158-169.
    26. Ana Isabel Morais & José Dias Curto, 2009. "Mandatory Adoption of IASB Standards: Value Relevance and Country-Specific Factors," Australian Accounting Review, CPA Australia, vol. 19(2), pages 128-143, June.
    27. Davide Rizzotti & Claudia Frisenna & Roberta Mazzone, 2017. "The impact of family owners’ monitoring on CEO turnover decisions and the role of trust," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 599-621, September.
    28. Bauman, Mark P., 2007. "Proportionate consolidation versus the equity method: Additional evidence on the association with bond ratings," International Review of Financial Analysis, Elsevier, vol. 16(5), pages 496-507.
    29. Ronald L. Stoltzfus & Ruth W. Epps, 2005. "An empirical study of the value-relevance of using proportionate consolidation accounting for investments in joint ventures," Accounting Forum, Taylor & Francis Journals, vol. 29(2), pages 169-190, June.
    30. Bernard Garrette & Pierre Dussauge & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Post-Print hal-00458812, HAL.
    31. Sara York Kenny & Robert Larson, 1993. "Lobbying behaviour and the development of international accounting standards," European Accounting Review, Taylor & Francis Journals, vol. 2(3), pages 531-554.
    32. Kazbi Soonawalla, 2006. "Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3-4), pages 395-417.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Efrat Shust & Dan Weiss, 2022. "Disentangling Relevance from Reliability in Value Relevance Tests," Sustainability, MDPI, vol. 14(20), pages 1-15, October.
    2. Adwan, Sami & Alhaj-Ismail, Alaa & Girardone, Claudia, 2020. "Fair value accounting and value relevance of equity book value and net income for European financial firms during the crisis," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 39(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wolf, Robin, 2018. "Ganz oder gar nicht - wer nutzte die Quotenkonsolidierung? Eine Analyse der Ausübung des Bilanzierungswahlrechts unter IAS 31 im Prime Standard der deutschen Börse," Arbeitspapiere 183, University of Münster, Institute for Cooperatives.
    2. David Alexander & Pascale Delvaille & Frédéric Demerens & Anne Le Manh-Béna & Chiara Saccon, 2012. "La consolidation des co-entreprises en IFRS : étude de l'impact du changement de méthodes pour les sociétés européennes," Post-Print hal-00935843, HAL.
    3. Badenhorst, Wessel M. & Brümmer, Leon M. & de Wet, Johannes H.vH., 2015. "The value-relevance of disclosed summarised financial information of listed associates," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 1-12.
    4. Michael E. Bradbury & Laura Mehnaz & Tom Scott, 2022. "The use and usefulness of equity accounting," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1957-1981, April.
    5. Wolf, Robin Paul, 2018. "IFRS 11 und 12 - Fluch oder Segen für die Finanzberichterstattung der Kooperationspartner? Erste Ergebnisse aus der Analyse der Eigenkapitalkostenentwicklung der Unternehmen des deutschen Prime Standa," Arbeitspapiere 179, University of Münster, Institute for Cooperatives.
    6. Abdulrahman Alomair & Alan Farley & Helen Hong Yang, 2022. "The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2839-2878, June.
    7. Manganaris, Panayotis & Spathis, Charalambos & Dasilas, Apostolos, 2015. "The effects of mandatory IFRS adoption and conditional conservatism on European bank values," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 72-81.
    8. Veith, Stefan & Werner, Jörg R., 2014. "Comparative Value Relevance Studies: Country Differences Versus Specification Effects," The International Journal of Accounting, Elsevier, vol. 49(3), pages 301-330.
    9. Günther, Nina & Gegenfurtner, Bernhard & Kaserer, Christoph & Achleitner, Ann-Kristin, 2009. "International financial reporting standards and earnings Quality: the myth of voluntary vs. mandatory adoption," CEFS Working Paper Series 2009-09, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    10. Palea, Vera & Scagnelli, Simone Domenico, 2014. "Do Earnings Reported under IFRS Improve the Prediction of Future Cash Flows? Evidence From European Banks," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201443, University of Turin.
    11. Keryn Chalmers & Greg Clinch & Jayne M Godfrey, 2011. "Changes in value relevance of accounting information upon IFRS adoption: Evidence from Australia," Australian Journal of Management, Australian School of Business, vol. 36(2), pages 151-173, August.
    12. Isidro, Helena & Raonic, Ivana, 2012. "Firm incentives, institutional complexity and the quality of “harmonized” accounting numbers," The International Journal of Accounting, Elsevier, vol. 47(4), pages 407-436.
    13. Devalle, Alain & Magarini, Riccardo & Onali, Enrico, 2009. "Assessing the Value Relevance of Accounting Data After the Introduction of IFRS in Europe," MPRA Paper 56174, University Library of Munich, Germany, revised 08 Oct 2009.
    14. Francesco Paolone & Fabrizio Granà & Laura Martiniello & Riccardo Tiscini, 2021. "Environmental risk indicators disclosure and value relevance: An empirical analysis of Italian listed companies after the implementation of the Legislative Decree 254/2016," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(5), pages 1471-1482, September.
    15. Palea, Vera, 2013. "IAS/IFRS and Financial Reporting Quality: Lessons from the European Experience," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201330, University of Turin.
    16. Alessandro Mechelli & Riccardo Cimini, 2014. "The value relevance of earnings and book value across the EU. A comparative Analysis," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2014(2-3-4), pages 83-113.
    17. IOAN-BOGDAN ROBU & Costel ISTRATE & Mihai CARP & CRISTIAN POPESCU & MIHAELA-ALINA ROBU, 2016. "The Value Relevance Of Financial Information Under The Influence Of Country Risks. The Case Of The Indian Listed Companies," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 77-93, December.
    18. Alali, Fatima A. & Foote, Paul Sheldon, 2012. "The Value Relevance of International Financial Reporting Standards: Empirical Evidence in an Emerging Market," The International Journal of Accounting, Elsevier, vol. 47(1), pages 85-108.
    19. Mingjun Zhou, 2012. "Value Relevance Of Book And Tax Income: A Macroeconomic Conditions Perspective," Accounting & Taxation, The Institute for Business and Finance Research, vol. 4(2), pages 1-12.
    20. Rajat Deb, 2019. "Accounting Theory Coherence Revisited," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 44(1), pages 36-57, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jiaata:v:38:y:2020:i:c:s106195182030001x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-international-accounting-auditing-and-taxation .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.