Relevance of Differences between Net Income based on IFRS and Domestic Standards for European Firms

Mary E. Barth, Wayne R. Landsman, Danqing Young and Zili Zhuang

Journal of Business Finance & Accounting, 2014, vol. 41, issue 3-4, 297-327

Abstract: Net income adjustments resulting from mandatory 2005 IFRS adoption in Europe are value relevant for financial and non-financial firms. Differences in relevance of the aggregate adjustment and adjustments related to several IFRS standards, for financial and non-financial firms and across country groups, suggest differences in domestic standards and institutions affect investors’ assessment of the relevance of IFRS accounting amounts. Despite these differences, except for French/German non-financial firms, investors view net income measured using IAS 39 Financial Instruments: Recognition and Measurement as more relevant than that measured using domestic standards, which is notable because IAS 39 was highly controversial in Europe.

Date: 2014
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