Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2008/21: The Value-Relevance of Adopting IFRS: Evidence from 145 NGAAP Restatements

Øystein Gjerde (), Kjell Henry Knivsflå () and Frode Sættem ()
Additional contact information
Øystein Gjerde: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Kjell Henry Knivsflå: Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Accounting, Auditing and Law, Helleveien 30, N-5045 Bergen, Norway
Frode Sættem: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: Firms listed on stock exchanges within the European Economic Area are required to report consolidated financial statements according to IFRS from 2005. The firms that adopted IFRS in 2005 were also required to restate their 2004 financial statements from national GAAP to provide comparable accounting figures. These two sets of financial statements for 2004 are thus based on identical underlying economic activities and are fully specified according to two different reporting regimes. Our sample consists of 145 restatements from NGAAP to IFRS for firms listed on the Oslo Stock Exchange in Norway. We test whether the IFRS accounting figures correlate more strongly with stock market values than the corresponding NGAAP figures. We find little evidence of increased value-relevance after adopting IFRS when comparing and evaluating the two regimes unconditionally. On the other hand, when evaluating the change in the accounting figures from NGAAP to IFRS, we find evidence that the reconcilement adjustments to IFRS are marginally value-relevant due to increased relevance of the balance sheet and the normalized net operating income. By weighting our sample by firm size, intangible asset intensity and profitability, we learn that the increased value-relevance of the net operating income stems from different reporting of intangible assets. Since more intangible assets are capitalized according to IFRS than NGAAP, our finding is consistent with the view that capitalizing intangible assets is more value-relevant than expensing them as incurred or through goodwill amortization.

Keywords: Value-relevance of reporting standards; IFRS versus NGAAP; accounting harmonization; balance sheet-oriented conceptual frameworks versus earningsoriented conceptual frameworks

JEL-codes: M41

52 pages, October 17, 2008

Full text files

163952  

Download statistics

Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:36:04.