The Impact of Eliminating the 20-F Reconciliation Requirement for IFRS Filers on Earnings Persistence and Information Uncertainty

44 Pages Posted: 27 Mar 2012

See all articles by Tony Kang

Tony Kang

University of Nebraska - Lincoln

Gopal V. Krishnan

Bentley University

Michael Wolfe

Virginia Tech

Han Yi

Korea University

Date Written: March 22, 2012


On November 15, 2007, the U.S. Securities and Exchange Commission (SEC) eliminated the requirement that foreign private issuers reporting under International Financial Reporting Standards (IFRS) include a reconciliation to U.S. GAAP in their 20-F filing. To the extent that the reconciliations had information content, it is possible that the information environment of IFRS filers deteriorated in the post-reconciliation period, unless they voluntarily improved disclosure quality. Using difference-in-differences tests, we examine whether there was any change in the persistence of earnings and analyst forecast dispersion after the new regulation. We find that earnings persistence increased (did not increase) and analyst uncertainty measured by the forecast dispersion did not increase (increased) for firms domiciled in weaker (stronger) investor protection countries. These results suggest that firms from a weaker investor protection environment had a greater incentive to “signal” the quality by voluntarily improving the disclosure quality in the post-reconciliation period to compensate for any possible information loss from no longer providing the reconciliation. Our findings also suggest that the elimination of the reconciliation requirement did not have a uniform effect on IFRS filers and that the effect varies with the firm’s home country reporting environment.

Keywords: International Financial Reporting Standards (IFRS), Accounting Convergence, Form 20-F Reconciliation, Earnings Quality

JEL Classification: M41

Suggested Citation

Kang, Tony and Krishnan, Gopal and Wolfe, Michael and Yi, Han, The Impact of Eliminating the 20-F Reconciliation Requirement for IFRS Filers on Earnings Persistence and Information Uncertainty (March 22, 2012). Accounting Horizons, Forthcoming. Available at SSRN:

Tony Kang (Contact Author)

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Gopal Krishnan

Bentley University ( email )

175 Forest Street
Waltham, MA 02452
United States
781-891-2477 (Phone)

Michael Wolfe

Virginia Tech ( email )

Pamplin College of Business
Department of Accounting and Information Systems
Blacksburg, VA 24061
United States
540-231-9170 (Phone)
540-231-2511 (Fax)

Han Yi

Korea University ( email )

Main Business Building 402
Korea University Business School
Seoul, 136-701
+82-2-3290-2629 (Phone)

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics