Abstract

http://ssrn.com/abstract=1979341
 
 

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The Cross-Country Comparability of IFRS Earnings and Book Values: Evidence from France and Germany


Qing Liao


University of Wisconsin - Madison

Thorsten Sellhorn


Ludwig-Maximilians-Universitaet (LMU) Munich

Hollis Ashbaugh Skaife


Graduate School of Management, UC-Davis; University of Wisconsin, Madison - Department of Accounting and Information Systems

September 1, 2011

Journal of International Accounting Research, Forthcoming

Abstract:     
Beginning in 2005, the EU began requiring consolidated financial reports of publicly traded firms to be prepared in accordance with EU-endorsed International Financial Reporting Standards (IFRS) in an effort to increase the comparability of financial information across EU Member States. While some expect IFRS reporting to increase the comparability of financial information across the EU, others argue that comparability is unlikely because IFRS implementation will vary conditional on national institutions and culture. We investigate the cross-country comparability of IFRS earnings and book values of French and German firms because these two EU states have well-developed equity markets and use the same currency while having social-economic and cultural differences that can affect managers’ IFRS implementation choices. Our results indicate that French and German IFRS earnings and book values are comparable in the year subsequent to IFRS adoption, but become less comparable in the years that follow. We document differences in accounting estimates, recognition of special items, and other equity reserves between French and German firms, which help explain the decrease in comparability over time. Our study adds to the growing literature on the financial statement effects of mandatory IFRS reporting and points to possible reasons for a sustained lack of cross-country comparability of financial information under a common accounting regime.

Number of Pages in PDF File: 56

Keywords: international financial reporting, IFRS, comparability, valuation usefulness

JEL Classification: G12, G14, G38, K22, M41, M42, M48

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Date posted: January 5, 2012  

Suggested Citation

Liao, Qing and Sellhorn, Thorsten and Skaife, Hollis Ashbaugh, The Cross-Country Comparability of IFRS Earnings and Book Values: Evidence from France and Germany (September 1, 2011). Journal of International Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1979341

Contact Information

Qing Liao
University of Wisconsin - Madison ( email )
716 Langdon Street
Madison, WI 53706-1481
United States
Thorsten Sellhorn
Ludwig-Maximilians-Universitaet (LMU) Munich ( email )
Ludwigstr. 28 RG IV
Munich, Bavaria 80539
Germany
+49(0)89-21806264 (Phone)
+49(0)89-21806327 (Fax)
HOME PAGE: http://www.rwp.bwl.uni-muenchen.de/personen/professoren/sellhorn/index.html
Hollis Ashbaugh Skaife (Contact Author)
Graduate School of Management, UC-Davis ( email )
Graduate School of Management
1 Shields Ave
Davis, CA 95616
United States
University of Wisconsin, Madison - Department of Accounting and Information Systems ( email )
School of Business
975 University Avenue
Madison, WI 53706
United States
608-263-7979 (Phone)
608-263-0477 (Fax)
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