... Key Words: Accounting, Regulation, IFRS, US GAAP, SEC, Standard setting, US equity markets, M... more ... Key Words: Accounting, Regulation, IFRS, US GAAP, SEC, Standard setting, US equity markets, Mandatory disclosure, Political economy ... 6.2. MAINTAIN US GAAP WITH CONTINUED CONVERGENCE BETWEEN IFRS AND US GAAP.....83 6.3. ...
We examine the impact of incentives on accounting quality changes around IFRS adoption. In partic... more We examine the impact of incentives on accounting quality changes around IFRS adoption. In particular, we examine earnings management and timely loss recognition, constructs often used to assess accounting standards quality. While existing literature documents accounting quality improvements following IFRS adoption, we find that improvements are confined to firms with incentives to adopt. Further, we find that firms that resist IFRS have closer connections with banks and inside shareholders, which could explain these firms' lack of incentives to adopt IFRS. The overall results indicate that incentives dominate accounting standards in determining accounting quality.
... IFRS constitutes change to a GAAP that induces higher quality financial reporting. For ... (e... more ... IFRS constitutes change to a GAAP that induces higher quality financial reporting. For ... (eg, before and after mandatory adoption of IFRS, or comparing US GAAP with IFRS) are mis-specified and thus make it difficult to compare different accounting standards. For example, ...
Drawing on the academic literature in accounting, finance and economics, we analyze economic and ... more Drawing on the academic literature in accounting, finance and economics, we analyze economic and policy factors related to the potential adoption of International Financial Reporting Standards (IFRS) in the U.S. We highlight the unique institutional features of U.S. markets to assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We discuss the compatibility of IFRS with the current U.S. regulatory and legal environment as well as the possible effects of IFRS adoption on the U.S. economy as a whole. We also consider how a switch to IFRS may affect worldwide competition among accounting standards and standard setters, and discuss the political ramifications of such a decision on the standard setting process and on the governance structure of the International Accounting Standards Board. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit tradeoff between (1) recurring, albeit modest, comparability benefits for investors, (2) recurring future cost savings that will largely accrue to multinational companies, and (3) one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. We conclude by outlining several possible scenarios for the future of U.S. accounting standards, ranging from maintaining U.S. GAAP, letting firms decide whether and when to adopt IFRS, to the creation of a competing U.S. GAAPbased set of global accounting standards that could serve as an alternative to IFRS. JEL classification: G14, G15, G30, K22, M41, M42
... Key Words: Accounting, Regulation, IFRS, US GAAP, SEC, Standard setting, US equity markets, M... more ... Key Words: Accounting, Regulation, IFRS, US GAAP, SEC, Standard setting, US equity markets, Mandatory disclosure, Political economy ... 6.2. MAINTAIN US GAAP WITH CONTINUED CONVERGENCE BETWEEN IFRS AND US GAAP.....83 6.3. ...
We examine the impact of incentives on accounting quality changes around IFRS adoption. In partic... more We examine the impact of incentives on accounting quality changes around IFRS adoption. In particular, we examine earnings management and timely loss recognition, constructs often used to assess accounting standards quality. While existing literature documents accounting quality improvements following IFRS adoption, we find that improvements are confined to firms with incentives to adopt. Further, we find that firms that resist IFRS have closer connections with banks and inside shareholders, which could explain these firms' lack of incentives to adopt IFRS. The overall results indicate that incentives dominate accounting standards in determining accounting quality.
... IFRS constitutes change to a GAAP that induces higher quality financial reporting. For ... (e... more ... IFRS constitutes change to a GAAP that induces higher quality financial reporting. For ... (eg, before and after mandatory adoption of IFRS, or comparing US GAAP with IFRS) are mis-specified and thus make it difficult to compare different accounting standards. For example, ...
Drawing on the academic literature in accounting, finance and economics, we analyze economic and ... more Drawing on the academic literature in accounting, finance and economics, we analyze economic and policy factors related to the potential adoption of International Financial Reporting Standards (IFRS) in the U.S. We highlight the unique institutional features of U.S. markets to assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We discuss the compatibility of IFRS with the current U.S. regulatory and legal environment as well as the possible effects of IFRS adoption on the U.S. economy as a whole. We also consider how a switch to IFRS may affect worldwide competition among accounting standards and standard setters, and discuss the political ramifications of such a decision on the standard setting process and on the governance structure of the International Accounting Standards Board. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit tradeoff between (1) recurring, albeit modest, comparability benefits for investors, (2) recurring future cost savings that will largely accrue to multinational companies, and (3) one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. We conclude by outlining several possible scenarios for the future of U.S. accounting standards, ranging from maintaining U.S. GAAP, letting firms decide whether and when to adopt IFRS, to the creation of a competing U.S. GAAPbased set of global accounting standards that could serve as an alternative to IFRS. JEL classification: G14, G15, G30, K22, M41, M42
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