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Value Relevance Change Under International Accounting Standards: An Empirical Study of Peru

Author

Listed:
  • Chunhui Liu

    (Department of Business and Administration, University of Winnipeg, Winnipeg, MB R3B 2E9, Canada)

  • Lee J. Yao

    (J. A. Butt College of Business, Loyola University New Orleans, New Orleans, LA 70118, USA)

  • Michelle Y. M. Yao

    (Faculty of Arts, Business, Informatics and Education, Central Queensland University, North Rockhampton, QLD 4702, Australia)

Abstract

In face of broad adoption of International Financial Reporting Standards (IFRS), the Securities and Exchange Commission (SEC) is considering its quality and acceptability. This paper reports a study that examines changes in value relevance with a sample of Peru firms mandated to use international accounting standards between 1999 and 2007. The period under study is broken into a period of International Accounting Standards (IAS) between 1999 and 2001, a period of early IFRS between 2002 and 2004, and a more recent period of IFRS between 2005 and 2007 by major changes to accounting standards. The empirical results generally indicate that value relevance improved from the IAS period to the early IFRS period when the International Accounting Standards Board (IASB) took over the International Accounting Standards Committee (IASC), but worsened from the early IFRS period to the recent IFRS period when more accounting standards started to reflect IASB's preference for fair value measurement of assets and liabilities. Quality weakens to a greater extent for firms with more discretion for fair value estimates. Further analysis shows that such changes are less likely to result from changes in economic conditions, but from the changes of the standards. The findings are particularly alarming in face of rising IFRS adoptions and call for quality improvement to IFRS.

Suggested Citation

  • Chunhui Liu & Lee J. Yao & Michelle Y. M. Yao, 2012. "Value Relevance Change Under International Accounting Standards: An Empirical Study of Peru," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 15(02), pages 1-17.
    • Handle: RePEc:wsi:rpbfmp:v:15:y:2012:i:02:n:s0219091511500081
    DOI: 10.1142/S0219091511500081
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    References listed on IDEAS

    as
    1. Ray Ball, 2006. "International Financial Reporting Standards (IFRS): pros and cons for investors," Accounting and Business Research, Taylor & Francis Journals, vol. 36(S1), pages 5-27.
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    More about this item

    Keywords

    Accounting quality; earnings quality; earnings management; timely loss recognition; value relevance; IAS; IFRS;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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