The impact of IFRS on net income and equity: evidence from Italian listed companies

Michela Cordazzo

46 citations0/0 files storedJournal of Applied Accounting Research

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Financial Reporting and XBRL

Abstract

Purpose The mandatory conversion to IFRS (International Financial Reporting Standards) has represented much more than a change in accounting rules. Firms’ main concerns have been to understand the extent to which accounting differences between national GAAP and IFRS could affect their reported performance. The purpose of this paper is to address this concern by providing empirical evidence of the nature and the size of the differences between Italian accounting principles and IFRS. Design/methodology/approach The total and individual differences between Italian GAAP and IFRS are identified and quantified in the reconciliations of net income and equity of companies listed on Borsa Italiana. The focus is to show the major consequences of the conversion to IFRS on accounting outcomes. Findings The empirical results indicate a more relevant total impact of such a transition on net income than equity. The analysis of individual adjustments shows a greater discrepancy between Italian GAAP and IFRS in the accounting treatment of intangible assets, income taxes, and business combinations with reference to both net income and equity. Originality/value The main contribution of the paper is to investigate the impact of mandatory IFRS adoption for Italian listed companies’ financial results. Previous literature does not focus on such a specific country, but it offers a comparative approach to different effects of IFRS on European countries.

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References

2007Financial statement effects of adopting international accounting standards: the case of Germany 2005International Accounting Standards and Accounting Quality 2001Domestic Accounting Standards, International Accounting Standards, and the Predictability of Earnings 1981Comparative International Accounting 2005Earnings management under German GAAP versus IFRS 2005The introduction of International Accounting Standards in Europe: Implications for international convergence 2005Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequences 1998Why Firms Comply Voluntarily with IAS: an Empirical Analysis with Swiss Data

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