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The Convergence of IFRS and U.S. GAAP : Evidence from the SEC 's Removal of Form 20‐F Reconciliations
Author(s) -
Mestelman Stuart,
Mohammad Emad,
Shehata Mohamed
Publication year - 2015
Publication title -
accounting perspectives
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.238
H-Index - 17
eISSN - 1911-3838
pISSN - 1911-382X
DOI - 10.1111/1911-3838.12049
Subject(s) - valuation (finance) , fair value , stock (firearms) , accounting , business , geography , archaeology
We use the SEC 's 2007 decision that eliminates the reconciliation requirement for foreign listed private issuers ( FPI s) reporting under IFRS as a natural experiment to examine whether IFRS and U.S. GAAP produce accounting information of comparable quality. We conduct statistical analyses using a sample of 563 firm‐year observations of FPI s during the period 2002 through 2008 for a panel of 70 FPI s that report under IFRS as our treatment group and 46 FPI s that report under U.S. GAAP as our control group. Using a stock‐valuation model and a difference‐in‐differences ( DD ) analysis of scaled residuals we examine whether the reconciliation values reported by IFRS FPI s prior to 2007 were value relevant and if the elimination of the reconciliation information in the post‐intervention period (2007 and 2008) has adversely affected the information available to investors to make stock‐valuation decisions. The results for the 2002 through 2006 period suggest that the reconciliation values for book value were value relevant. The DD analysis shows that while the residual‐value model incorporating reconciliation information produced comparable scaled stock price residuals for IFRS and U.S. GAAP FPI s prior to 2007, the removal of the reconciliation information did not lead to statistically significant increases in scaled stock price residuals for IFRS and U.S. GAAP FPI s.