Differences between Domestic Accounting Standards and IAS: Measurement, Determinants and Implications

45 Pages Posted: 15 Dec 2005

See all articles by Ole-Kristian Hope

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Yuan Ding

China Europe International Business School (CEIBS)

Thomas Jeanjean

ESSEC Business School - Department of Accounting and Management Control

Hervé Stolowy

HEC Paris - Accounting and Management Control Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 3, 2006

Abstract

This study analyzes determinants and effects of differences between Domestic Accounting Standards (DAS) and International Accounting Standards (IAS). We use an extensive list of differences between DAS and IAS to create two indices, absence and divergence. Absence measures the extent to which the rules regarding certain accounting issues are missing in DAS but are covered in IAS. Divergence applies in circumstances where the rules regarding the same accounting issue differ in DAS and IAS. It measures the extent of differences between DAS-based rules and IAS-based rules.

Using a sample of 30 countries for 2001, we show that absence is (mainly) determined by the importance of the equity market and ownership concentration, while divergence is positively associated with the level of economic development and the importance of the accounting profession, but is constrained by the importance of equity markets. Our analysis suggests that a higher level of absence implies more opportunities for earnings management and for decreases in firm-specific information to investors. A larger divergence from IAS is associated with richer firm-specific information in capital markets.

Keywords: International accounting differences, institutional factors, earnings management, synchronicity

JEL Classification: M41, M44, M47

Suggested Citation

Hope, Ole-Kristian and Ding, Yuan and Jeanjean, Thomas and Stolowy, Hervé, Differences between Domestic Accounting Standards and IAS: Measurement, Determinants and Implications (March 3, 2006). Rotman School of Management Working Paper No. 07-04. Available at SSRN: https://ssrn.com/abstract=869844 or http://dx.doi.org/10.2139/ssrn.869844

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Yuan Ding

China Europe International Business School (CEIBS) ( email )

699, Hongfeng Road
Shanghai 201206, Shanghai 201206
China

Thomas Jeanjean

ESSEC Business School - Department of Accounting and Management Control ( email )

Av Bernard Hirsch
Cergy-Pontoise 95021
France

Hervé Stolowy

HEC Paris - Accounting and Management Control Department ( email )

Jouy-en-Josas Cedex
France
+33 1 39 67 94 42 (Phone)
+33 1 39 67 70 86 (Fax)

HOME PAGE: http://www.hec.fr/stolowy

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