The Development of Accounting Quality of IAS and IFRS Over Time: The Case of Germany

40 Pages Posted: 7 Dec 2007 Last revised: 2 Oct 2008

See all articles by Mari Paananen

Mari Paananen

University of Hertfordshire

Cecilia Lin

University of Portland

Date Written: December 1, 2007

Abstract

We examine the characteristics of accounting numbers using a sample of German companies reporting under IAS (2000-2002), and IFRS (2003-2004) and (2005-2006). We investigate the change in accounting quality during these time periods as IASB revises and issues new standards. Contrary to expectations, we find that earnings and book value of equity are less value relevant during the IFRS periods than the IAS period. The findings on earnings smoothing and timely loss recognition corroborate the value relevance test. Our results suggest that firms in the IFRS periods manage earnings more and do not recognize losses in a timely manner as compared to the IAS period. These results are reasonably robust even when we remove new and less experienced adopters of IFRS.

Keywords: IAS, IFRS, Accounting quality, Value relevance, Earnings management, Timeliness

JEL Classification: M41, M44, M43, M47, G12

Suggested Citation

Paananen, Mari and Lin, Cecilia, The Development of Accounting Quality of IAS and IFRS Over Time: The Case of Germany (December 1, 2007). Available at SSRN: https://ssrn.com/abstract=1066604 or http://dx.doi.org/10.2139/ssrn.1066604

Mari Paananen (Contact Author)

University of Hertfordshire ( email )

Hertford Herts, SG13 8QF
United Kingdom

Cecilia Lin

University of Portland ( email )

Portland, OR 97203
United States

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