Accounting Quality under U.S. GAAP versus IFRS: The Case of Germany

Cussatt, Marc; Huang, Li; Pollard, Troy

doi:10.2308/jiar-51997

Cited by 20 publications

(17 citation statements)

References 54 publications

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“…Numerous studies examined the association between IFRS and accounting quality, however, the results are mixed and inconclusive. One group of studies find the positive impact of IFRS on accounting quality (Barth et al, 2008;Apergis et al, 2014;Cussatt et al, 2018;Key and Kim, 2020) whereas another group reports a negative association (Jeanjean and Stolowy, 2008;Ahmed et al, 2013).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Do high-quality standards ensure higher accounting quality? A study in India

Bansal

Kumar

2021

ARJ

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Purpose The study aims to investigate the impact of International Financial Reporting Standards (IFRS)-converged standards (Indian Accounting Standards (INAS)) on the accounting quality of Indian firms. The phased manner approach of implementing INAS provides us a unique setting to investigate the issue in India. Design/methodology/approach The study used difference-in-difference (DiD) methodology, where the accounting quality is compared between test firms and benchmark firms during the pre-and post-INAS adoption period. Accounting quality is operationalized through four different constructs, namely, earnings smoothing, discretionary accruals, earnings timeliness and value relevance of earnings. Findings The findings deduced from the empirical results demonstrate that accounting quality has been significantly reduced after the adoption of INAS. In particular, results show that the degree of earnings smoothing, and the magnitude of discretionary accruals have been increased among test firms in the post-adoption year. Besides, findings provide evidence that timely recognition of losses and value relevance of earnings has been reduced for test firms relative to benchmark firms after the adoption of INAS. Practical implications The results suggest that the mere adoption of high-quality standards does not ensure higher accounting quality in countries with a weaker enforcement mechanism. Hence, stringent enforcement mechanisms are needed to ensure full compliance with accounting standards. This study serves as a case study for other emerging countries that are in the process of IFRS convergence and make them aware of the unintended consequences of IFRS adoption. Originality/value Indian authorities implemented INAS in a phased manner that provides a unique setting to use DiD methodology. DiD helps to control the impact of concurrent economic shocks, while examining the impact of the particular regulatory shock. Besides, this is the first attempt to investigate the impact of INAS on the accounting quality of Indian firms.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Do high-quality standards ensure higher accounting quality? A study in India

Bansal

Kumar

2021

ARJ

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“…The literature also shows that value relevance studies can be conducted within a single country (Gjerde et al ., 2008; Filip, 2010; Chalmers et al ., 2011) or across countries (Aubert and Grudnitski, 2011; Clarkson et al ., 2011; Kouki, 2018). Another stream shows that value relevance studies have been applied under different IFRS adoption status which can be either mandatory (Barth et al ., 2014; Cussatt et al ., 2018) or voluntary (Jermakowicz et al ., 2007; Van der Meulen et al ., 2007). Different adoption status can lead to different results as voluntary adoption might be associated with incentives to gain legitimacy, while mandatory adoption is expected to reflect the pure change in the accounting regime (Horton and Serafeim, 2010).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia

Alomair

Farley

Yang

2021

Accounting & Finance

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We examined the joint and relative value relevance of book value of equity (BVE) and earnings before (2015–2016), after (2017–2018) and during the comparative year (2016) of mandatory adoption of International Financial Reporting Standards (IFRS) in Saudi Arabia. Results show that the accounting information is jointly value relevant (R2), with no significant change between accounting information prepared under Saudi GAAP and IFRS. However, we found a positive change in the relative value relevance of the BVE after IFRS implementation, mainly related to the introduction of fair value measurement. Differences in value relevance were found across variances in company characteristics.

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“…Prior studies examine whether the mandatory shift from domestic standard to IFRS affect accounting quality, but have produced mixed results. Cussatt et al (2018) [30] find no evidence for German firms that the change in accounting quality proxies are significantly different between the newly IFRS adopting firms and IFRS reporting samples for the entire period. Beisland and Knivsfla (2015) [31] examine value relevance after the adoption of IFRS in Norway.…”

Section: Hypotheses Developmentmentioning

confidence: 98%

The Effect of the Adoption of International Accounting Standards No. 12 (IAS No. 12) for Firms Reporting Losses: Evidence from Korea

Hong

Shim

2019

Sustainability

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This study examines the effects of the adoption of International Accounting Standards No. 12, Income Taxes (IAS No.12) on the incremental information about future profitability for firms reporting losses compared to Korean Generally Accepted Accounting No.16, Accounting for Income Taxes (K-GAAP No.16). Specifically, this paper shows that whether the IAS No.12 affects the information of deferred tax assets (DTAs) regarding loss persistence which implies the ability to predict earnings sustainability. Using a sample of 2,905 observations from Korean listed firms that reported a loss between 2007 and 2014, we divide loss firm-years into categories of ‘good news’ (GN) or ‘bad news’ (BN) based on whether management appears to report an increase in DTAs. We find that our tax categories have incremental information about the probability of loss reversal under K-GAAP No. 16, but under IAS No.12 the incremental effects of a deferred tax balance disappear. Also, we find that investors underweight the informativeness of DTAs under K-GAAP, and after the adoption of IAS No.12, investors cannot obtain buy-and-hold returns by buying GN firm-years and selling BN firms-years. However, this is not because investors understand the information of DTAs, but because the informativeness of DTAs deteriorates after the relaxation in the recognition threshold of DTAs.

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Accounting Quality under U.S. GAAP versus IFRS: The Case of Germany

Cited by 20 publications

References 54 publications

Do high-quality standards ensure higher accounting quality? A study in India

Do high-quality standards ensure higher accounting quality? A study in India

The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia

The Effect of the Adoption of International Accounting Standards No. 12 (IAS No. 12) for Firms Reporting Losses: Evidence from Korea

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