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Relevance of Differences Between Net Income Based on IFRS and Domestic Standards for European FirmsMary E. BarthStanford University - Graduate School of Business Wayne R. LandsmanUniversity of North Carolina (UNC) at Chapel Hill - Accounting Area Danqing Xu YoungChinese University of Hong Kong (CUHK) - School of Accountancy Zili ZhuangChinese University of Hong Kong (CUHK) - Faculty of Business Administration June 6, 2012 Abstract: We find that the adjustments to net income resulting from mandatory 2005 adoption of IFRS in Europe are relevant to investors in financial as well as non-financial firms. However, we find differences in value relevance of the aggregate net income adjustment and adjustments relating to several individual IFRS standards for these two types of firms and across major country groups, which suggests that differences in institutional features or domestic standards can affect investors’ assessment of the relevance of IFRS accounting amounts. Despite these differences, we find that investors in all firms, except French/German non-financial firms, view net income measured in accordance with IAS 39 Financial Instruments: Recognition and Measurement as more value relevant than net income measured in accordance with domestic standards, which is notable because IAS 39 was highly controversial in Europe.
Number of Pages in PDF File: 52 Keywords: IFRS, Value Relevance, Income Reconciliation, Europe JEL Classification: M41, G12, G15, G15, G38 working papers seriesDate posted: May 17, 2011 ; Last revised: September 19, 2012Suggested CitationContact Information
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