Have IFRS Changed How Stock Prices Associate with Earnings and Book Values? Evidence from Norway

36 Pages Posted: 29 Jan 2009 Last revised: 11 Jun 2013

See all articles by Leif Atle Beisland

Leif Atle Beisland

University of Agder

Kjell Henry Knivsflå

Norwegian School of Economics (NHH)

Date Written: June 11, 2013

Abstract

Firms listed on European, Australian and an increasing number of other stock exchanges are required to report according to International Financial Reporting Standards (IFRS). We use a Norwegian sample to examine whether the adoption of IFRS in 2005 has changed the value relevance of earnings relative to book values. IFRS are balance sheet-oriented and emphasize measurement at fair value. In contrast, Norwegian GAAP (NGAAP) are earnings-oriented and focus on measurement at transactional (historical) cost. IFRS also differ by recognizing more intangible assets, which further contributes to making IFRS less conservative than NGAAP. We find that more fair value accounting increases the value relevance of book values and decreases the value relevance of earnings. However, improved matching of expenditures on intangible assets with their future economic benefits increases the persistence of earnings and the value relevance of earnings relative to book values.

Keywords: Regulation, IFRS, accounting conservatism, transactional cost, fair value, intangible assets

JEL Classification: M41, G15

Suggested Citation

Beisland, Leif Atle and Knivsflå, Kjell Henry, Have IFRS Changed How Stock Prices Associate with Earnings and Book Values? Evidence from Norway (June 11, 2013). Available at SSRN: https://ssrn.com/abstract=1334533 or http://dx.doi.org/10.2139/ssrn.1334533

Leif Atle Beisland

University of Agder ( email )

Serviceboks 422
Kristiansand, VEST AGDER 4604
Norway

Kjell Henry Knivsflå (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, 5045
Norway

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