Abstract

http://ssrn.com/abstract=2018337
 
 

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Why Do Firms Rarely Adopt IFRS Voluntarily? Academics Find Significant Benefits and the Costs Appear to be Low


Hans Bonde Christensen


University of Chicago - Booth School of Business

March 8, 2012

Review of Accounting Studies, Vol. 17, No. 3, 2012

Abstract:     
Kim and Shi (this issue) document that voluntary IFRS adoption is associated with significant benefits and argue that the effect is causal – a conclusion that is similar to many published papers on IFRS adoption. Yet voluntary IFRS adopters constitute only a small percentage of the global population of firms, which implies that either practitioners behave irrationally or the benefits are incorrectly estimated by academics. In this discussion I argue that the error is on the part of academics, not practitioners, and that it is mainly due to the lack of exogenous variation in accounting standards. This conclusion is based on inconsistencies between the estimated benefits and costs of IFRS adoption, as well as the accounting standards choices of presumed rational managers. I also propose a contracting explanation for the capital market benefits around IFRS adoption in which managers behave rationally, but IFRS per se is not the cause.

Number of Pages in PDF File: 13

Keywords: International accounting, International accounting standards (IAS), International Financial Reporting Standards (IFRS)

JEL Classification: G14, G15, G30, K22, M41, M47

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Date posted: March 9, 2012 ; Last revised: May 28, 2012

Suggested Citation

Christensen, Hans Bonde, Why Do Firms Rarely Adopt IFRS Voluntarily? Academics Find Significant Benefits and the Costs Appear to be Low (March 8, 2012). Review of Accounting Studies, Vol. 17, No. 3, 2012. Available at SSRN: http://ssrn.com/abstract=2018337 or http://dx.doi.org/10.2139/ssrn.2018337

Contact Information

Hans Bonde Christensen (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States

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