Costs of Mandatory IFRS: Evidence of Reduced Accrual Reliability

Lai, CY; Li, Y; Shan, Y; Taylor, SL

Costs of Mandatory IFRS: Evidence of Reduced Accrual Reliability

Lai, CY Li, Y Shan, Y Taylor, SL

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Citation:: 2013
Issue Date:: 2013-10-02

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Field	Value	Language
dc.contributor.author	Lai, CY	en_US
dc.contributor.author	Li, Y	en_US
dc.contributor.author	Shan, Y	en_US
dc.contributor.author	Taylor, SL https://orcid.org/0000-0001-8870-4966	en_US
dc.date.issued	2013-10-02	en_US
dc.identifier.citation	2013	en_US
dc.identifier.uri	http://hdl.handle.net/10453/117757
dc.description.abstract	This study investigates the impact of mandatory adoption of International Financial Reporting Standards (IFRS) on accrual reliability (Richardson et al. 2005). Using a large sample of Australian firm years drawn from before and after the mandatory adoption of IFRS, we find that accrual reliability declined significantly after mandatory IFRS implementation. Working capital, non-current operating, and financing accruals all contribute to this decline. We also find that brand name audit firms (i.e., the Big four) are able to significantly attenuate any decrease in accrual reliability during the post-IFRS period. Our results contrast with evidence identifying benefits of mandatory IFRS such as increased value relevance, but are consistent with at least some degree of trade-off between relevance and reliability. Such trade-offs seem to have been largely ignored in prior examinations of the impact of mandatory IFRS.	en_US
dc.title	Costs of Mandatory IFRS: Evidence of Reduced Accrual Reliability	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	150303 Corporate Governance and Stakeholder Engagement	en_US
utslib.for	150103 Financial Accounting	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access

Abstract:

This study investigates the impact of mandatory adoption of International Financial Reporting Standards (IFRS) on accrual reliability (Richardson et al. 2005). Using a large sample of Australian firm years drawn from before and after the mandatory adoption of IFRS, we find that accrual reliability declined significantly after mandatory IFRS implementation. Working capital, non-current operating, and financing accruals all contribute to this decline. We also find that brand name audit firms (i.e., the Big four) are able to significantly attenuate any decrease in accrual reliability during the post-IFRS period. Our results contrast with evidence identifying benefits of mandatory IFRS such as increased value relevance, but are consistent with at least some degree of trade-off between relevance and reliability. Such trade-offs seem to have been largely ignored in prior examinations of the impact of mandatory IFRS.

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http://hdl.handle.net/10453/117757