Convergence of Accounting Standards and the Usefulness of U.S. GAAP Reconciliations

• In Event: U.S. Related Studies

Abstract

Our study examines the usefulness of U.S. GAAP reconciliation information and how country-level attributes influence its usefulness. Using reconciliation data for 2002 – 2007 we find evidence to support the expectation that global convergence of accounting standards has decreased the usefulness of U.S. GAAP reconciliations. Further, we find that country-level factors, such as foreign registrants’ home country investor protection, earnings quality, and book value of equity differences, affect the usefulness of reconciliation information. Our results support the SEC's claims that the usefulness of reconciliation information has decreased contributing to the decision to remove the requirement for foreign registrants to prepare U.S. GAAP reconciliations if financial statements are prepared using IFRS as issued by the IASB. The results also inform the SEC’s deliberations on removing reconciliation requirements for firms preparing financial reports using GAAP other than IFRS as issued by the IASB.

Authors

• Singgih Wijayana, Gadjah Mada University

• Keryn Chalmers, Monash University, Caulfield Campus

• Farshid Navissi, Monash University, Caulfield Campus