Article2010

Comparisons on selected ratios between IFRS and US GAAP companies

Da‐Hsien Bao · Jooh Lee · George C. Romeo

15 citations0/0 files storedJournal of financial reporting & accounting

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Financial Analysis and Corporate Governance

Abstract

Purpose The purpose of this paper is to provide evidence of the effect of the differences related to reporting inventory, property plant and equipment, intangible assets, and development costs between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) companies. Design/methodology/approach Both univariate tests (t‐tests) and multivariate tests (ANOVA, probit and logit analyses) are used to compare the ratios between IFRS and US GAAP companies. Findings Results consistently show that IFRS‐country firms have a significantly higher current ratio, a significantly lower asset turnover ratio, and a significantly lower debt‐to‐asset ratio. Research limitations/implications This paper only focuses on inventory, property plant and equipment, intangible assets, and development costs. Other financial variables are not considered. Practical implications The results are useful for individuals who are interested in reporting and investing in countries using different financial reporting systems. Originality/value This paper is a timely examination of the recent emphasis of mandating IFRS.

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References

1968FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY 1985Positive Accounting Theory 2008Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences 2006International Financial Reporting Standards (IFRS): pros and cons for investors 2007Financial reporting quality: is fair value a plus or a minus?2007Mandatory IFRS Reporting Around the World: Early Evidence on the Economic Consequences 2006Principles‐ versus rules‐based accounting standards: the FASB's standard setting strategy 2008Global Financial Reporting: Implications for U.S. Academics

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2020Inventories Accounting under US-GAAP and IFRS Standards: The Differences That Hinder the Full Convergence

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