Are IFRS-based and US GAAP-based accounting amounts comparable?

Barth, Mary E.; Landsman, Wayne R.; Lang, Mark H.; Williams, Christopher

doi:10.1016/j.jacceco.2012.03.001

Cited by 651 publications

(622 citation statements)

References 43 publications

(74 reference statements)

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“…A rationale for this stems from the fact that accounting ratios depend on the standards used in different regions. Despite harmonization measures taken by the European Union since 2005, a significant gap still exists between the reporting conventions of U.S. and non-U.S. firms (Barth et al, 2012). Leuz (2010), who groups countries according both to regulatory frameworks and to reporting practices, puts continental Europe and the U.S. into separate groups for both criteria.…”

Section: Methodsmentioning

confidence: 99%

Europe vs. the U.S.: A new look at the syndicated loan pricing puzzle

2017

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According to the syndicated loan pricing puzzle (Carey and Nini, Journal of Finance, 2007) interest rates charged to corporate borrowers are lower in Europe than in the U.S. Our investigation suggests that controlling for region-specific credit ratings makes the Europe-U.S. gap insignificant, and solves the puzzle. We speculate that the puzzle originates from the lack of uniformity of accounting standards.Keywords: Pricing puzzle, syndicated loan, rating, Europe, U.S. indicate that syndicated lending attracts around 50% of corporate debt issuance in the U.S., and some 20% in Europe. Fig. 1 shows the evolution of the market between 1992 and 2014. The so-called SL pricing puzzle emerged from the work of Carey and Nini (2007), henceforth C&N, showing that, all else equal, credit in the European SL market is significantly cheaper than in its U.S. counterpart. Subsequent articles provided partial clues to the puzzle by emphasizing that ratings alone are insufficient to account for the riskiness of SL contracts. Gaul and Uysal (2013) blamed unobservable volatility differences between U.S. and European firms. That explanation solved the puzzle, but only for listed borrowers. Berg et al. (2016) underscored that loan category matters, and showed that the puzzle vanishes for syndicated credit lines, which account for 70% of their full sample.Stressing that ratings are based on accounting ratios (Campbell and Taksler, 2003), which depend on standards that vary across jurisdictions, this paper shows that using region-specific ratings solves the SL puzzle, not only over the period covered by C&N, but also for a larger sample of SLs. Data and MethodsAnalyzing the SL puzzle requires first comparing the all-in spreads-the spread to LIBOR, plus fees-of deals arranged in the U.S. with those observed on the European market. C&N capture the Europe-U.S. difference by introducing a dummy variable for European loans in the OLS regression explaining the all-in-spreads. They control for a number of variables, including the borrower's credit rating. This econometric design relies on the assumption that, for lenders, the informational content of credit ratings is uniform across jurisdictions. We lift this assumption by introducing

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Section: Methodsmentioning

confidence: 99%

Europe vs. the U.S.: A new look at the syndicated loan pricing puzzle

2017

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“…With regard to convergence, the two Boards (FASB and IASB), in consultation with other national and regional bodies, collaborated through joint projects to develop common standards and remove differences between International Standards and US GAAP, and their tactics to achieve this goal are described in two different documents: The Norwalk Agreement and the Memorandum of Understanding (MoU) originally issued in and updated in 2008(Barth, Landsman, Lang, & Williams, 2012.…”

Section: Ifrs 15 Revenue Recognition: the Joint Standardmentioning

confidence: 99%

Financial Statements of Banks as a Source of Information About Implementation of IFRS 15: The Evidence from Poland

Bauer¹,

Centorrino²

2017

JMAA

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Banks in the economies of individual countries play the role of entities of public trust and are perceived as "too big to fail". In fact, they are exposed to risks associated with business operations. In practice, there are even instances of banks going bankrupt. Therefore, the reliability of the financial statements of a bank as a source of The subjects for research are the consolidated financial statements of five major banks in Poland. As a result of research, it was found that in all studied cases, work on the implementation of IFRS 15 was observed. However, looking at every bank separately, a differentiated approach to presenting information on the standard is observed, which may be a hindrance for users of banks' financial statements.

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“…Their results suggest that investors rely on reconciliation information to make valuation decisions. Using a sample of IFRS firms in 27 countries that adopted IFRS and a sample of U.S. firms matched on size and industry, Barth, Landsman, Lang, and Williams, (2012) document that both before and after IFRS firms adopt IFRS, accounting quality is higher for U.S. firms.…”

Section: Us Gaap and Ifrs Comparisonsmentioning

confidence: 99%

Does the SEC's Waiver of IFRS to U.S. GAAP Reconciliation Improve the Quality of Financial Reporting?

Chao

Horng

2013

AFR

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This paper compares accounting-quality metrics for foreign firms before and after the SEC waived the reconciliation requirement for IFRS firms. We find that foreign issuers applying IFRS exhibit more income smoothing and less timely recognition of losses than do foreign firms filing U.S. GAAP reconciliations in the IFRS reporting period. However, we also find that accounting amounts are more value relevant for IFRS firms than their counterparts. Differences in accounting quality between the two sets of firms in the U.S. GAAP reconciliation period do not account for the IFRS reporting-period differences. Our findings also document that foreign firms filing U.S. GAAP reconciliations experience a greater improvement in accounting quality in terms of less earnings smoothing and more timely recognition of losses than do foreign issuers adopting IFRS between the U.S. GAAP reconciliation and IFRS reporting periods. Overall, the combined evidence suggests that application of IFRS by non-U.S. firms has not enhanced financial reporting comparability with firms filing U.S. GAAP reconciliations. The above implications are robust to a number of alternative specifications.

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Are IFRS-based and US GAAP-based accounting amounts comparable?

Cited by 651 publications

References 43 publications

Europe vs. the U.S.: A new look at the syndicated loan pricing puzzle

Europe vs. the U.S.: A new look at the syndicated loan pricing puzzle

Financial Statements of Banks as a Source of Information About Implementation of IFRS 15: The Evidence from Poland

Does the SEC's Waiver of IFRS to U.S. GAAP Reconciliation Improve the Quality of Financial Reporting?

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