Does Comparability with Local GAAP Improve When Firms Adopt IFRS?

• In Event: Forum on Reporting Standards

Abstract

We examine the impact on comparability between local GAAP [Russian Accounting Standards - RAS] and International Financial Reporting Standards [IFRS] after IFRS adoption. Russia provides a unique setting to explore this issue because publicly traded firms with consolidated financial statements must produce two sets of financial statements – one under each regime. When we examine measures involving income, we find increasing comparability over time. The quality of earnings, measured by discretionary accruals, exhibits no change under IFRS while it declines under RAS. That trend reverses when we compare public firms reporting RAS and IFRS simultaneously to firms (both public and private) reporting RAS only (never having used IFRS). We attribute our findings to a monitoring effect from IFRS in that publicly traded firms are constrained from reporting RAS numbers that differ significantly from IFRS, even when it results in higher taxes.

Authors

• Elizabeth Hendrix Turner, University of Texas Rio Grande Valley-Brownsville

• Stephen Wen-Jen Lin, Florida International University

• Clark M Wheatley, Florida International University

• Dina Clark, Bloomberg University