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Relevance of Differences between Net Income based on IFRS and Domestic Standards for European Firms
Author(s) -
Barth Mary E.,
Landsman Wayne R.,
Young Danqing,
Zhuang Zili
Publication year - 2014
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12067
Subject(s) - net income , international financial reporting standards , relevance (law) , accounting , business , german , financial instrument , comprehensive income , finance , economics , gross income , public economics , archaeology , tax reform , political science , law , history , state income tax
Abstract Net income adjustments resulting from mandatory 2005 IFRS adoption in Europe are value relevant for financial and non‐financial firms. Differences in relevance of the aggregate adjustment and adjustments related to several IFRS standards, for financial and non‐financial firms and across country groups, suggest differences in domestic standards and institutions affect investors’ assessment of the relevance of IFRS accounting amounts. Despite these differences, except for French/German non‐financial firms, investors view net income measured using IAS 39 Financial Instruments: Recognition and Measurement as more relevant than that measured using domestic standards, which is notable because IAS 39 was highly controversial in Europe.