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A comparison of properties of earnings, book value, and residual income for financial reporting under IAS and IFRS


  • Henghsiu Lin
  • Mari Paananen


We examine and compare the valuation properties of earnings and book value of equity under international accounting standards (IAS) during 2000-2002 with those under international financial reporting standards (IFRS) during 2003-2004 (the voluntary period) and 2005-2006 (the mandatory period). Accordingly, we conduct our investigation using a sample of German and Swiss companies reporting under IAS during 2000-2002 and IFRS during 2003-2004 and 2005-2006 by assessing the relative performance of three accounting-based valuation models. We find that the RI model dominates in all three time periods under study for both countries. Our findings are supported by robustness tests. Our study suggests that the recent changes in international accounting standards do not change the valuation properties of Swiss and German IAS/IFRS accounting variables. However, we document a decrease in the explanatory power of the accounting-based valuation models from the IAS period to the IFRS periods.

Suggested Citation

  • Henghsiu Lin & Mari Paananen, 2011. "A comparison of properties of earnings, book value, and residual income for financial reporting under IAS and IFRS," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 7(3), pages 219-252.
  • Handle: RePEc:ids:ijaape:v:7:y:2011:i:3:p:219-252

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