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Intended and Unintended Consequences of Mandatory IFRS Adoption: A Review of Extant Evidence and Suggestions for Future Research

47 Pages Posted: 29 Sep 2010 Last revised: 22 Apr 2013

Ulf Brüggemann

Humboldt University of Berlin - School of Business and Economics

Joerg-Markus Hitz

University of Goettingen

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich

Date Written: June 20, 2012

Abstract

This paper discusses empirical evidence on the economic consequences of mandatory IFRS adoption in the European Union and provides suggestions on how future research can add to our understanding of these effects. Based on the stated objectives of the EU’s so-called ‘IAS Regulation,’ we distinguish between intended and unintended consequences of mandatory IFRS adoption. Empirical research on the intended consequences generally fails to document an increase in the comparability or transparency of financial statements. In contrast, there is rich and almost unanimous evidence of positive effects on capital markets and at the macroeconomic level. We argue that certain research design issues are likely to contribute to this apparent mismatch in findings. The literature investigating unintended consequences of mandatory IFRS adoption is still in its infancy. However, extant empirical evidence and insights from non-IFRS settings suggest that mandatory IFRS adoption has the potential to materially affect contractual outcomes. We conclude that both the intended and the unintended consequences deserve further scrutiny to assess the costs and benefits of mandatory IFRS adoption and provide specific guidance for future research.

Keywords: International accounting, IFRS adoption, economic consequences, contracting, regulation, review

JEL Classification: G38, K12, K22, K34, M41, M48

Suggested Citation

Brüggemann, Ulf and Hitz, Joerg-Markus and Sellhorn, Thorsten, Intended and Unintended Consequences of Mandatory IFRS Adoption: A Review of Extant Evidence and Suggestions for Future Research (June 20, 2012). European Accounting Review, Vol. 22, Issue 1, pp. 1-37, 2013. Available at SSRN: https://ssrn.com/abstract=1684036 or http://dx.doi.org/10.2139/ssrn.1684036

Ulf Brüggemann (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

Joerg-Markus Hitz

University of Goettingen ( email )

Platz der Goettinger Sieben 3
D-37073 Goettingen
Germany
+49 551 39 7313 (Phone)

HOME PAGE: http://www.uni-goettingen.de/en/110622.html

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich ( email )

Ludwigstr. 28 RG IV
Munich, Bavaria 80539
Germany
+49(0)89-21806264 (Phone)
+49(0)89-21806327 (Fax)

HOME PAGE: http://www.rwp.bwl.uni-muenchen.de/personen/professoren/sellhorn/index.html

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