Costs of mandatory international financial reporting standards: Evidence of reduced accrual reliability
- Publication Type:
- Journal Article
- Citation:
- Australian Journal of Management, 2013, 38 (3), pp. 491 - 521
- Issue Date:
- 2013-12-16
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This study investigates the impact of mandatory adoption of international financial reporting standards on accrual reliability. Using a large sample of Australian firm-years drawn from before and after the mandatory adoption of international financial reporting standards, we find that accrual reliability declined significantly after mandatory international financial reporting standards 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 international financial reporting standards period. Our results contrast with evidence identifying benefits of mandatory international financial reporting standards, 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 international financial reporting standards. © The Author(s) 2013.
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