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Do IFRS provide better information about intangibles in Europe?

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Author Info

  • Jean-Michel Sahut
  • Sandrine Boulerne
  • Frédéric Teulon

Abstract

Purpose – The purpose of this paper is to study the information content of intangible assets under IAS/IFRS when compared to local GAAP for European listed companies. Design/methodology/approach – The paper employs multivariate regression models for a sample of 1,855 European listed firms in a six-year period, from 2002 to 2004 in local GAAP and from 2005 to 2007 in IAS/IFRS to investigate the empirical relationships between market value of European firms and book value of their intangible assets. Findings – The results suggest that the book value of other intangible assets of European listed firms is higher under IFRS than local GAAP and has more informative value for explaining the price of the share and stock market returns. European investors, however, consider the financial information conveyed by capitalized goodwill to be less relevant under IFRS than with local GAAP. Thus, identified intangible assets capitalized on European company balance sheets provide more value-relevant information for shareholders than unidentified intangible assets that have been transferred into goodwill, with the exception of Italian and Finnish investors. Originality/value – The paper adds to the existing literature on IFRS by documenting the association between the market value of European listed firms and the book value of their goodwill and other intangibles assets. The study complements prior studies by demonstrating that country differences persist despite the use of common accounting standards and that legal and regulatory country characteristics as well as market forces could still have a significant impact on the value relevance of accounting data.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Review of Accounting and Finance.

Volume (Year): 10 (2011)
Issue (Month): 3 (August)
Pages: 267-290

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Handle: RePEc:eme:rafpps:v:10:y:2011:i:3:p:267-290

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Related research

Keywords: Accounting standards; Europe; Goodwill; IFRS; Intangible assets; Prices; Returns;

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References

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  1. Wolfgang Schultze, 2005. "The Information Content of Goodwill-Impairments under FAS 142: Implications for External Analysis and Internal Control," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 57(3), pages 276 – 297, July.
  2. Katherine Schipper, 2005. "The introduction of International Accounting Standards in Europe: Implications for international convergence," European Accounting Review, Taylor & Francis Journals, vol. 14(1), pages 101-126.
  3. Anne Cazavan-Jeny, 2003. "Le Ratio Market-To-Book Et La Reconnaissance Des Immateriels - Une Etude Du Marche Français," Post-Print halshs-00582744, HAL.
  4. Anne Cazavan-Jeny & Thomas Jeanjean, 2006. "The negative impact of R&D capitalization: A value relevance approach," European Accounting Review, Taylor & Francis Journals, vol. 15(1), pages 37-61.
  5. Gjerde, Øystein & Knivsflå, Kjell Henry & Sættem, Frode, 2008. "The Value-Relevance of Adopting IFRS: Evidence from 145 NGAAP Restatements," Discussion Papers 2008/21, Department of Business and Management Science, Norwegian School of Economics.
  6. Tristan Boyer & Elena Chane-Alune, 2014. "IFRS and the need for non-financial information," Working Papers 2014-340, Department of Research, Ipag Business School.
  7. Robert W. Holthausen, 2009. "Accounting Standards, Financial Reporting Outcomes, and Enforcement," Journal of Accounting Research, Wiley Blackwell, vol. 47(2), pages 447-458, 05.
  8. Rick Cuijpers & Willem Buijink, 2005. "Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequences," European Accounting Review, Taylor & Francis Journals, vol. 14(3), pages 487-524.
  9. STOLOWY, Herve & BRETON, Gaetan, 2000. "A framework for the classification of accounts manipulations," Les Cahiers de Recherche 708, HEC Paris.
  10. Frédéric Teulon, 2014. "Ethics, moral philosophy and economics," Working Papers 2014-288, Department of Research, Ipag Business School.
  11. Naomi Soderstrom & Kevin Jialin Sun, 2007. "IFRS Adoption and Accounting Quality: A Review," European Accounting Review, Taylor & Francis Journals, vol. 16(4), pages 675-702.
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Cited by:
  1. Cristina-Ionela Fădur & Marilena Mironiuc, 2012. "The Paradox Of Goodwill: Why Do We Pay More Than The Fair Value? Study On Romanian Companies," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 213-220, November.

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