Financial Statement Effects of Adopting IFRS: The Canadian Experience

Forthcoming in International Journal of Accounting and Information Management, 26(4)

40 Pages Posted: 18 Dec 2017 Last revised: 20 Feb 2018

See all articles by Eva K Jermakowicz

Eva K Jermakowicz

Tennessee State University

Chun-Da Chen

Lamar University

Han Donker

University of Alaska Anchorage

Date Written: December 18, 2017

Abstract

This study investigates whether mandatory adoption of International Financial Reporting Standards (IFRS) in Canada resulted in capital market benefits from enhanced financial reporting quality. We examine the effects of implementing IFRS for financial statements of the largest Canadian firms (S&P/TSX 60) listed on the Toronto Stock Exchange (TSX). We compare accounting numbers reported under pre-changeover Canadian GAAP (CGAAP) with those under IFRS for the same period, and document how IFRS adoption changes key accounting measures and financial ratios. Significant accounting standard differences between two accounting frameworks having direct impact on financial measures in transition to IFRS are analyzed. Our analysis was also separately performed for companies representing Basic Materials and Energy and the Financial Services sectors because of the large concentration of companies engaged in these industries in our sample, finding that significant effects of adopting IFRS are associated with industry practices. The empirical results show that the adoption of IFRS in Canada improved the relevancy of financial reporting as gauged by the association between book value of equity and net income with the market value of company shares in the post-adoption periods. The study should be of interest to U.S. regulators considering IFRS adoption by U.S. publicly traded companies as well as to regulators, standard setters and listed companies in all countries worldwide that are in transition to IFRS.

Keywords: IFRS Adoption, Canadian Companies, Financial Statement Effects, Value Relevance

Suggested Citation

Jermakowicz, Eva K and Chen, Chun-Da and Donker, Han, Financial Statement Effects of Adopting IFRS: The Canadian Experience (December 18, 2017). Forthcoming in International Journal of Accounting and Information Management, 26(4), Available at SSRN: https://ssrn.com/abstract=3089834

Eva K Jermakowicz

Tennessee State University ( email )

3500 John A Merritt Blvd.
Nashville, TN 37209
United States

Chun-Da Chen (Contact Author)

Lamar University ( email )

Beaumont, TX 77710
United States

Han Donker

University of Alaska Anchorage ( email )

3211 Providence Drive
Anchorage, AK 99508
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
126
Abstract Views
612
rank
245,221
PlumX Metrics