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Relative Effects of IFRS Adoption and IFRS Convergence on Financial Statement Comparability
Author(s) -
Lin Steve,
Riccardi William N.,
Wang Changjiang,
Hopkins Patrick E.,
Kabureck Gary
Publication year - 2019
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12475
Subject(s) - comparability , accounting , financial statement , enforcement , convergence (economics) , business , international financial reporting standards , economics , political science , mathematics , audit , macroeconomics , combinatorics , law
One of the primary objectives of both adoption of IFRS and convergence between IFRS and U.S. GAAP is to increase financial statement comparability. Using a unique setting in Germany, we compare the effectiveness of these two approaches in achieving this desired outcome. Our empirical tests show that both adoption and convergence lead to an increase in comparability after the new enforcement regulation in 2005. However, difference‐in‐differences tests show that adoption does not lead to a significant incremental increase in comparability beyond convergence. The findings of this study should be of interest to regulators and standard setters as they assess alternative methods of aligning domestic standards with IFRS.