Financial statement effects of adopting IFRS: the Canadian experience

Eva K. Jermakowicz · Chun‐Da Chen · Han A. Donker

21 citations0/0 files storedInternational Journal of Accounting and Information Management

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

Abstract

Purpose The purpose of this study is to examine the effects of adopting International Financial Reporting Standards (IFRS) on financial statements of the largest Canadian firms (S&P/TSX 60) listed on the Toronto Stock Exchange (TSX). Design/methodology/approach This study investigates the financial statement effects of 46 companies from the S&P/TSX 60 index which report under IFRS in 2011 and switched to IFRS from CGAAP. This study used panel data analysis, which can be considered as more powerful when conducting cross-sectional and in time analysis among companies. Because of weakness of Cramer statistic on R-square, the authors used interaction terms as suggested by Hope (2007). Findings Consistent with the authors’ perceptions, this study finds that significant effects of adopting IFRS are associated with industry practices. The empirical results show that the adoption of IFRS in Canada created more relevant financial reporting for book value of equity and net income in the post-adoption periods. Originality/value This study should be of interest to the US regulators considering IFRS adoption by US publicly traded companies as well as to regulators, standard setters and listed companies in all countries worldwide that are in transition to IFRS.

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References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1991Earnings Management During Import Relief Investigations 1968An Empirical Evaluation of Accounting Income Numbers 2008International Accounting Standards and Accounting Quality 2008Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences 2003Incentives versus standards: properties of accounting income in four East Asian countries 2001The relevance of the value relevance literature for financial accounting standard setting: another view

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