Information Content of IFRS versus Domestic Accounting Standards: Evidence from Finland
The Finnish Journal of Business Economics, Issue 2, pp. 141-177, 2012
64 Pages Posted: 12 Apr 2010 Last revised: 14 Jan 2013
Date Written: June 13, 2012
Abstract
This paper compares the information content of financial statements based on IFRS with those based on Finnish Accounting Standards (FAS) using a sample of mandatory IFRS adopters. Finland is particularly well suited for this comparison because it has a high-quality reporting environment, its domestic standards differ significantly from those of IFRS, and it allowed early adoption of IFRS. The results show that earnings under IFRS are no more timely in reflecting publicly available news than earnings under FAS. Furthermore, book values of assets and liabilities measured under IFRS are no more value relevant than they are under FAS. However, additional analyses reveal that IFRS earnings provide marginally greater information content than FAS earnings for predicting future cash flows. Several possible reasons for these results are discussed.
Keywords: International Financial Reporting Standards, mandatory IFRS adoption, value relevance
JEL Classification: M41, G15
Suggested Citation: Suggested Citation
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