This study provides evidence of a directly observable and significant cost of International Financial Reporting Standards (IFRS) adoption, by examining the fees incurred by firms for the statutory audit of their financial statements at the time of transition. Using a comprehensive dataset of all publicly traded Australian companies, we quantify an economy-wide increase in the mean level of audit costs of 23 percent in the year of IFRS transition. We estimate an abnormal IFRS-related increase in audit costs in excess of 8 percent, beyond the normal yearly fee increases in the pre-IFRS period. Further analysis provides evidence that small firms incur disproportionately higher IFRS-related audit fees. We then survey auditors to construct a firm-specific measure of IFRS audit complexity. Empirical findings suggest that firms with greater exposure to audit complexity exhibit greater increases in compliance costs for the transition to IFRS. Given the renewed debate about whether the Securities and Exchange Commission (SEC) should mandate IFRS for U.S. firms, our results are of timely importance. Data Availability: Data are publicly available from the sources identified in the paper. Survey response data are available from the authors upon request.
Abstract. The purpose of this study is to examine the information content of the components of the annual change in the quantity of proved reserves reported by U.S oil and gas (O&G) producers. In particular, it investigates the contemporaneous association between the unexpected portions of discoveries, production, net purchases, and revisions of prior quantity estimates and unexpected security retums during the release week of the 1984 to 1988 annual reports or forms 10-K of these firms. The empirical results suggest that (1) disaggregating the net change in the quantity of proved reserves into its components conveys additional information beyond that contained in the net change in total proved reserves itself, (2) discoveries are highly associated with security returns even after controlling for production, and (3) revisions, net purchases, and production have a modest influence on security returns. The findings of this study are interpreted within the context of the economic environment of the O&G industry during the test period.Resumi. L'auteur examine le contenu en information des 616ments du changement annuel de la quantity de reserves prouvdes dont font 6tat les producteurs p^troliers et gaziers des fitats-Unis. II s'int6resse en particulier, pour la periode 1984-1988, k l'association que l'on £tablit maintenant entre, d'une part, la portion inattendue des ddcouvertes, la production, les achats nets et la revision des estimations anterieures de quantity et, d'autre part, les rendements impr^vus des titres au cours de la semaine de publication des rapports annuels ou des formulaires 10-K des entreprises. Les r&ultats empiriques donnent h penser que (1) la decomposition en ses differents Elements du changement net dans la quantity des reserves prouvdes livre davantage d'information que le changement net global lui-meme, (2) les decouvertes sont associees de trSs prfes aux rendements des titres, meme une fois controMe la variable production, et (3) les revisions, les achats nets et la production ont une modeste influence sur les rendements des titres. Les resultats de cette etude sont interpretes dans le contexte economique du secteur petrolier et gazier au cours de la periode d'analyse. The Fmancial Accounting Standards Board (FASB), the Securities and Exchange Commission (SEQ, industry experts, and certain members of the academic community suggest that historical cost-based financial statements for oil and gas (O&G) producers have limited predictive value (FASB 1982,156).i They argue that, under the principles of historical cost accounting, there is no basis for evaluating the effectiveness of efforts to find new reserves in the year during which these efforts actually occur (FASB 1976,244). The recognized limitations of historical cost accounting and the lack of a uniform accounting method for O&G-producing firms led the FASB to issue its Statement of Financial Accounting Standards (SFAS) No. 19 (1977) and SFAS No. 69 (1982).2 Under SFAS No. 19, the FASB required O&G producers to disclose information about...
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