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Accrual anomaly and mandatory adoption of IFRS: Evidence from Germany

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  • Kim, Jung Hoon
  • Lin, Steve

Abstract

This study examines the effect of mandatory adoption of IFRS on the accrual anomaly in Germany. Using the setting in Germany between 2002 and 2008, we find that the accrual anomaly occurs between 2002 and 2004 (pre-IFRS period) but disappears between 2006 and 2008 (post-IFRS period). Results are consistent after extending the test period to 2010 and controlling for analysts' cash forecasts. We also find that German firms with more significant improvements in analysts following, forecast accuracy, forecast dispersion, and earnings management following mandatory adoption of IFRS in 2005 have greater decline of the accrual anomaly between 2006 and 2008. Overall, our findings suggest that IFRS adoption together with improved reporting enforcement significantly reduces the accrual anomaly in Germany.

Suggested Citation

  • Kim, Jung Hoon & Lin, Steve, 2019. "Accrual anomaly and mandatory adoption of IFRS: Evidence from Germany," Advances in accounting, Elsevier, vol. 47(C).
    • Handle: RePEc:eee:advacc:v:47:y:2019:i:c:s0882611019301129
    DOI: 10.1016/j.adiac.2019.100445
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    More about this item

    Keywords

    IFRS; Accrual anomaly; Analysts following; Forecast accuracy; Forecast dispersion; Earnings management; Germany;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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