Did Eliminating the 20-F Reconciliation Between IFRS and US GAAP Matter?

34 Pages Posted: 20 Oct 2010  

John (Xuefeng) Jiang

Michigan State University

Kathy R. Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management

Isabel Yanyan Wang

Michigan State University

Date Written: October 19, 2010

Abstract

The SEC decided in 2007 to allow foreign private issuers who use IFRS as promulgated by the IASB (pure IFRS filers, hereafter) to stop providing reconciliations to US GAAP. Some opposed the measure because the limited academic literature available at the time indicated that the reconciliation is useful. But this research mostly used data prior to the formal convergence efforts of the IASB and FASB and did not focus on pure IFRS filers. We examine the information content of the reconciliations for a sample of 88 pure IFRS filers during 2006 and 2007. Consistent with the reconciliation lacking usefulness for pure IFRS filers just prior to 2008, we find no evidence that the reconciliation for these IFRS filers is associated with abnormal trading volume, abnormal return volatility, and changes in the bid-ask spread around the release of the reconciliation. We also find no evidence that eliminating the reconciliation changed the market’s response to the 20-Fs of pure IFRS filers in 2008. We do, however, find that the average pure IFRS filer accelerated filing its 20-F by 9.6 days in 2008 and even more so for those with more complex reconciliations, which is consistent with meaningful cost savings.

Keywords: Reconciliation, IFRS, 20-F

JEL Classification: M41, M48, G12, G14, G15, G18

Suggested Citation

Jiang, John (Xuefeng) and Petroni, Kathy R. and Wang, Isabel Yanyan, Did Eliminating the 20-F Reconciliation Between IFRS and US GAAP Matter? (October 19, 2010). Available at SSRN: https://ssrn.com/abstract=1694590 or http://dx.doi.org/10.2139/ssrn.1694590

John (Xuefeng) Jiang

Michigan State University ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-3031 (Phone)
517-432-1101 (Fax)

HOME PAGE: http://www.msu.edu/~jiangj/

Kathy Ruby Petroni (Contact Author)

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States
517-432-2924 (Phone)
517-432-1101 (Fax)

Isabel Wang

Michigan State University ( email )

N233 Business Complex
Broad School of Business
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.msu.edu/~wangyany/

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