Relevance of Differences between Net Income Based on IFRS and Domestic Standards for European Firms

31 Pages Posted: 11 Apr 2014

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Danqing Young

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Zili Zhuang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: April/May 2014

Abstract

Net income adjustments resulting from mandatory 2005 IFRS adoption in Europe are value relevant for financial and non‐financial firms. Differences in relevance of the aggregate adjustment and adjustments related to several IFRS standards, for financial and non‐financial firms and across country groups, suggest differences in domestic standards and institutions affect investors’ assessment of the relevance of IFRS accounting amounts. Despite these differences, except for French/German non‐financial firms, investors view net income measured using IAS 39 Financial Instruments: Recognition and Measurement as more relevant than that measured using domestic standards, which is notable because IAS 39 was highly controversial in Europe.

Keywords: International Financial Reporting Standards (IFRS), IAS 39, Financial Instruments, value relevance, European adoption of IFRS

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Young, Danqing Xu and Zhuang, Zili, Relevance of Differences between Net Income Based on IFRS and Domestic Standards for European Firms (April/May 2014). Journal of Business Finance & Accounting, Vol. 41, Issue 3-4, pp. 297-327, 2014, Available at SSRN: https://ssrn.com/abstract=2423590 or http://dx.doi.org/10.1111/jbfa.12067

Mary E. Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
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Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

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Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Danqing Xu Young

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
+852 2609 7892 (Phone)
+852 2603 5114 (Fax)

Zili Zhuang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration ( email )

Shatin N.T.
Hong Kong

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