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

See all articles by Henry Jarva

Henry Jarva

Aalto University - School of Business

Anna-Maija Lantto

University of Vaasa

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

Jarva, Henry and Lantto, Anna-Maija, Information Content of IFRS versus Domestic Accounting Standards: Evidence from Finland (June 13, 2012). The Finnish Journal of Business Economics, Issue 2, pp. 141-177, 2012, Available at SSRN: https://ssrn.com/abstract=1588087 or http://dx.doi.org/10.2139/ssrn.1588087

Henry Jarva (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland

Anna-Maija Lantto

University of Vaasa ( email )

PO Box 700
Vaasa, FI-65101
Finland

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