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Comparability Effects of Mandatory IFRS Adoption

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  • Stefano Cascino
  • Joachim Gassen

Abstract

The mandatory adoption of IFRS by many countries worldwide fuels the expectation that financial accounting information might become more comparable across countries. This expectation is opposed to an alternative view that stresses the importance of incentives in shaping accounting information. We provide early evidence on this debate by investigating the effects of mandatory IFRS adoption on the comparability of financial accounting information around the world. Using two comparability proxies based on De Franco et al. [2011], our results suggest that the overall comparability effect of mandatory IFRS adoption is marginal at best. To investigate the reasons for this finding, we first hand-collect data on IFRS compliance for a sample of German and Italian firms and find that firm-, region-, and country-level incentives systematically shape accounting compliance. We then use the identified compliance incentives to explain the variance in the comparability effect of mandatory IFRS adoption and find it to vary systematically with firm-level incentives, suggesting that only firms with high compliance incentives experience substantial increases in comparability.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2012-009.

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Length: 64 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2012-009

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Keywords: international accounting; IFRS; comparability; accounting harmonization; financial accounting compliance; reporting incentives;

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References

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Cited by:
  1. Palea Vera, 2013. "The Effect of the European Regulation 1606/2002 on Market Efficiency: Early Empirical Evidence and Some Suggestions for Future Research and Policy-Making Discussion," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201310, University of Turin.
  2. Ulf Brüggemann & Jörg-Markus Hitz & Thorsten Sellhorn, 2012. "Intended and unintended consequences of mandatory IFRS adoption: A review of extant evidence and suggestions for future research," SFB 649 Discussion Papers SFB649DP2012-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Rute Gonçalves & Patrícia Lopes, 2014. "Accounting in Agriculture: Disclosure practices of listed firms," FEP Working Papers 530, Universidade do Porto, Faculdade de Economia do Porto.

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