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Did the Mandatory Adoption of IFRS Affect the Earnings Quality of Canadian Firms?

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  • Guoping Liu
  • Jerry Sun

Abstract

This study examines whether the mandatory adoption of International Financial Reporting Standards (IFRS) affected the earnings quality of Canadian public firms. We compare the pre‐IFRS versus the post‐IFRS earnings quality, as measured by discretionary accruals, performance‐matched discretionary accruals, small positive earnings, earnings persistence, and the earnings response coefficient. Using a sample of 274 firms, we find no significant difference in discretionary accruals, performance‐matched discretionary accruals, the likelihood of small positive earnings, and the earnings response coefficient between the pre‐ and post‐IFRS periods, despite the finding that firms have more persistent earnings in the post‐IFRS period than in the pre‐IFRS period. Overall, results from this study are mixed and suggest that there has been no significant change in earnings quality for public Canadian firms after the adoption of IFRS. Résumé Les auteurs se demandent si l'obligation d'adopter les Normes internationales d'information financière (IFRS) a eu une incidence sur la qualité des résultats des sociétés ouvertes canadiennes. Ils comparent la qualité des résultats avant et après l'adoption des IFRS, en utilisant comme indicateurs les ajustements discrétionnaires, les ajustements discrétionnaires selon le rendement d'une entreprise appariée (comparable), les résultats positifs modestes, la persistance des résultats et le coefficient de réaction aux résultats. L'étude d'un échantillon de 274 sociétés ne révèle aucune différence significative dans les ajustements discrétionnaires, les ajustements discrétionnaires selon le rendement d'une entreprise appariée, la probabilité de résultats positifs modestes et le coefficient de réaction aux résultats entre les périodes antérieure et postérieure aux IFRS, bien qu'il soit observé que les sociétés affichent des résultats plus persistants dans la période postérieure aux IFRS que dans la période antérieure aux IFRS. Dans l'ensemble, les résultats de l'étude sont mitigés et semblent indiquer que l'adoption des IFRS n'a pas entraîné de changement significatif dans la qualité des résultats des sociétés ouvertes canadiennes.

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  • Guoping Liu & Jerry Sun, 2015. "Did the Mandatory Adoption of IFRS Affect the Earnings Quality of Canadian Firms?," Accounting Perspectives, John Wiley & Sons, vol. 14(3), pages 250-275, September.
    • Handle: RePEc:wly:accper:v:14:y:2015:i:3:p:250-275
    DOI: 10.1111/1911-3838.12047
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