Factors Affecting a Firm’s Decision to File IFRS Financial Statements in the United States: Evidence from Foreign Private Issuers

• In Event: SESSION 5C: IFRS Issues

Abstract

Whether or not U.S. GAAP should converge with International Financial Reporting Standards is currently an important question in both academics and practice. The SEC recently released a report that failed to indicate a decision or timeline regarding the convergence of U.S. GAAP with IFRS. Some of the most important issues to be addressed in the decision are whether or not the adoption of IFRS will be beneficial for firms and investors and how the use of IFRS will affect U.S. capital markets. While there are many inferences made about the benefits of IFRS convergence for stakeholders in the U.S. based on research of IFRS adoption in other countries, there is little quantitative analysis performed on issuers in the U.S. The U.S. market and reporting environment is distinctly different than other countries, weakening inferences from adoption in other countries. This study attempts to fill this gap by examining the factors affecting foreign private issuers' decisions to file statements using IFRS or U.S. GAAP in the United States. Among many factors affecting a firm’s decision, size appears to be the most significant factor identified in this analysis. Smaller firms tend to file using IFRS, while larger firms file in the U.S. using U.S. GAAP, suggesting that they believe this sends a more positive signal to investors and is worth the additional cost, contrary to the conclusions reached based on adoption in other countries.

Author

• Jennifer Lynn Yardley, University of Texas at Arlington