Measuring the Impact of International Financial Reporting Standards on Market Performance of Publicly Traded Companies

• In Event: Dialogue Session 2
  In Dialogue Session: Dialog Session II

Abstract

The decision whether to require publicly traded companies to adopt International Financial Reporting Standards (IFRS) remains in flux. According to the timeline proposed by the US Securities and Exchange Commission, complete acceptance of IFRS in the US could be as early as 2015. With the potential replacement of US GAAP with IFRS in the near future, understanding the impact of IFRS on corporate financial reporting is more important than ever. This study examines two factors which are critical considerations in the decision to accept or not accept IFRS in the US: How different is financial statement information derived under IFRS from information derived under US generally accepted accounting principles (GAAP); and how much incremental information value, if any, is provided by IFRS over US GAAP. The present study extends prior research by examining concurrently both differences and their impact on market performance. Findings of this study support the view that differences on financial statement results between IFRS and US GAAP are not significant, thus, supporting proponents of adoption of IFRS in the US, after which all US publicly traded companies would use IFRS and not US GAAP.

Authors

• Amanda M Grossman, Murray State University

• Murphy Smith, Murray State University

• Wayne A Tervo, Murray State University