Information Lost: A Descriptive Analysis of IFRS Firms' 20-F Reconciliations

Journal of Applied Research in Accounting and Finance (JARAF), Vol. 3, No. 1, pp. 15-31, 2008

23 Pages Posted: 1 Oct 2008

See all articles by Marlene Plumlee

Marlene Plumlee

University of Utah - School of Accounting

David Plumlee

University of Utah - David Eccles School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2008

Abstract

In December 2007 the SEC issued a formal rule release that allows foreign-private issuers that employ the IFRS to file their financial statements without providing a reconciliation to U.S. GAAP. While the rule change was made after the SEC received and analyzed comments from various constituents on the proposing release, the rule change has not been without controversy and many have argued that the decision was 'premature', based at least partially on evidence of the usefulness of the reconciliations to investors and others.

The purpose of our study is to provide a more complete picture of the information that will be lost to investors due to the rule change. Our analysis focuses on the quantitative values included in the reconciliation, a measure of the information formerly required by the SEC. We identify 100 FPIs that filed 20-Fs during 2006 using IFRS. We collect and classify the line-by-line amounts into 22 categories and, using this classification, examine the frequency, magnitude, and sign of the reconciling items. We also sort the FPIs based on market cap (size) and industry and provide the same statistics within those groups. In our analyses we document that there are a few categories where a large proportion of FPIs have reported reconciling items while there are several categories where reconciling items are relatively infrequent. In addition, we observe that size does seem to matter; the frequency, magnitude, and sign of the reconciling items differ across size groups. We also observe differences across industry groups.

Keywords: IFRS, US GAAP, foreign-private issuers

JEL Classification: G12, M41, M44, M45, M47, G38

Suggested Citation

Plumlee, Marlene A. and Plumlee, David, Information Lost: A Descriptive Analysis of IFRS Firms' 20-F Reconciliations (July 30, 2008). Journal of Applied Research in Accounting and Finance (JARAF), Vol. 3, No. 1, pp. 15-31, 2008, Available at SSRN: https://ssrn.com/abstract=1263281

Marlene A. Plumlee (Contact Author)

University of Utah - School of Accounting ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

David Plumlee

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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