The Effects of Mandatory IFRS Adoption in the EU: A Review of Empirical Research

Brian Singleton‐Green

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

Abstract

This paper reviews the empirical research evidence on the effects of mandatory IFRS adoption in the EU. The research is classified and assessed in relation to the objectives of EU Regulation 1606/2002, which made IFRS mandatory in the EU. The review finds that there is evidence of benefits following IFRS adoption in relation to financial reporting transparency and comparability, the cost of capital, market liquidity, corporate investment efficiency and cross-border capital flows. But the evidence on some of these matters is disputed and it is unclear how far the benefits identified are attributable to the adoption of IFRS or to other concurrent institutional changes, particularly in enforcement. What is clear is that the benefits found are uneven, varying with the institutions and incentives that apply for different companies in different countries. On the possible role of IFRS in the financial crisis in the EU, more research is needed before conclusions can be drawn. The paper also considers the problems of interpreting the research and drawing conclusions from it for policy making purposes.

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References

2001The relevance of the value relevance literature for financial accounting standard setting: another view 2001The relevance of the value-relevance literature for financial accounting standard setting 2014Accounting Standards Harmonization and Financial Statement Comparability: Evidence from Transnational Information Transfer 2011The Impact of Corporate Governance on IFRS Adoption Choices 2001GAAP 2001 : a survey of national accounting rules benchmarked against international accounting standards 2010The pros and cons of regulating corporate reporting: A critical review of the arguments 2014The Effect of IFRS Adoption Conditional Upon the Level of Pre-adoption Divergence

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