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Does the Introduction of IFRS Change the Timeliness of Loss Recognition? Evidence from German Firms

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Abstract

In this paper, we re-evaluate the hypothesis that the introduction of the IFRS has an impact on the timeliness of loss recognition. We test this hypothesis in a data set of public German firms that report according to German-GAAP and IFRS, respectively. The parallel use of the two accounting standards in Germany provides a unique opportunity to contribute to the academic discussion, as well as to the current policy debate on regulatory reform in Germany. Starting from the standard time series concept of conditional conservatism that was initially proposed by Basu (1997), we implement a wide range of test specifications, including (i) a threshold unit-root test specification; (ii) a multivariate approach to outlier detection and (iii) various forms of controlling for fixed effects. We do not find evidence that IFRS and German-GAAP firms differ with respect to their timeliness of loss recognition in any of these specifications - a result that appears surprising in light of the more prudent regulation in the German-GAAP, but is consistent with some earlier findings in the literature.

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  • Sebastian Brauer & Carl-Friedrich Leuschner & Frank Westermann, 2011. "Does the Introduction of IFRS Change the Timeliness of Loss Recognition? Evidence from German Firms," IEER Working Papers 87, Institute of Empirical Economic Research, Osnabrueck University.
    • Handle: RePEc:iee:wpaper:wp0087
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    1. Wolfgang Ballwieser, 2014. "Ansätze und Ergebnisse einer ökonomischen Analyse des Rahmenkonzepts zur Rechnungslegung," Schmalenbach Journal of Business Research, Springer, vol. 66(5), pages 451-476, August.

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    More about this item

    Keywords

    IFRS; German-GAAP; Timely loss recognition; Conservatism;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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