voluntary ifrs disclosures: evidence from the transition from uk gaap to ifrss
TRANSCRIPT
Voluntary IFRS disclosures:evidence from the transition from
UK GAAP to IFRSsGeorge Emmanuel Iatridis
Department of Economics, University of Thessaly, Volos, Greece
Abstract
Purpose – The purpose of this study is to investigate how the provision of voluntary InternationalFinancial Reporting Standard (IFRS) disclosures in the pre-adoption period has affected the IFRStransition process of UK listed firms. The study also seeks to identify the motivation of firms withfinancing needs to provide voluntary IFRS disclosures and determines whether the provision ofvoluntary IFRS disclosures in the pre-adoption period leads to more value relevant numbers.
Design/methodology/approach – The study utilises logistic and linear regressions to test thehypothetical relations set up in the study. The categorisation of firms into voluntary andnon-voluntary IFRS disclosers is based on the (non-mandatory) provision of material IFRS informationprior to adoption about the upcoming adoption of IFRSs in 2005. Company categorization isparticularly based on the construction of an index similar to the disclosure index formulated by theCenter for International Financial Analysis and Research.
Findings – With regard to IFRS transition, firms that provided voluntary IFRS disclosures prior toadoption display a greater positive change in equity and earnings. Non-voluntary IFRS disclosers exhibit agreater positive change in leverage and a decrease in liquidity. Voluntary IFRS disclosers exhibit higherequity and debt financing needs and tend to be audited by a big auditor and be cross-listed.
Research limitations/implications – The study implies that the need to obtain financing on betterterms would motivate managers to provide voluntary (IFRS) disclosures to show that they are familiarwith the upcoming regulatory change and ready to implement it when it becomes effective. Theprovision of voluntary IFRS disclosures leads to more value relevant accounting measures, suggestingthat less information asymmetry would lead to the disclosure of informative and higher qualityaccounting information assisting investors in making informed judgements.
Originality/value – Knowing about different firms’ transition experience would assist accountingstandard setters in issuing explanatory IFRS guidance in order to lead to an efficient transition toIFRSs for countries that intend to adopt IFRSs or perform an accounting change. The examination ofIFRS transition for firms that have experienced the change is important and would provide insight tofirms considering this option. The findings further assist accounting academics and students,accountants and investors in their effort to study the motivation for providing voluntary disclosures aswell as the magnitude and materiality of IFRS transition on companies’ financial accounts.
Keywords International Financial Reporting Standards, Voluntary IFRS disclosures, IFRS transition,Financing needs, Value relevance, Financial reporting, United Kingdom, Financing
Paper type Research paper
1. IntroductionPositive accounting theory seeks to explain and predict why a specific accountingpolicy is selected. Positive accounting theory makes a number of predictions about the
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JEL classification – M41The author would like to thank the Editor of Managerial Auditing Journal and two
anonymous referees for their useful comments on previous drafts of the paper.
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Received 31 May 2011Reviewed 26 October 2011
Amended 13 December 2011
Managerial Auditing JournalVol. 27 No. 6, 2012
pp. 573-597q Emerald Group Publishing Limited
0268-6902DOI 10.1108/02686901211236409
behaviour and actions of managers. It suggests that firms would disclose sets ofinformation that suit their financial needs (Fields et al., 2001). Firms may also behave inan opportunistic manner and influence their capital structure, in order to reinforce theirreported earnings and contractual arrangements as well as their reputation(Chung et al., 2002). Managers may be inclined to provide voluntary disclosures inorder to clarify possible areas of dispute or explain their financial decisions, or eventune the timing of voluntary disclosures to influence their reported earnings anddisplay a favourable transition to International Financial Reporting Standards (IFRSs),thereby reducing any potential regulatory costs (Hand and Skantz, 1998). Positiveaccounting theory would suggest that by providing voluntary disclosures, firms showthat they are acting optimally and promote financial reporting quality and investorinterests (Fields et al., 2001). The choice to provide voluntary disclosures wouldprovide investors with a positive signal about the validity and verifiability of reportedfinancial accounts. For example, highly leveraged firms would be keen to voluntarilydisclose accounting information in order to satisfy the needs of lenders and therequirements of debt covenants (Lambert, 2001).
Accounting disclosures should assist users in evaluating past, present, and futureevents as well as assumptions, estimates and uncertainties. Since managers would bereluctant to disclose bad news, market participants would appreciate the voluntarydisclosure of bad news and difficult-to-ascertain information (Basu, 1997). Kothari et al.(2009) argue that the provision of voluntary disclosures and the ex ante commitment totimely disclose losses and sensitive information would increase managerial incentivesand result in higher managerial compensation. Voluntary disclosures that are supportedby appropriate quantitative and qualitative evidence, such as for example, how revenuerecognition and related contracts will change in the IFRS era (IAS 18 “Revenue”) or howfair value accounting (IAS 39 “Financial Instruments: Recognition and Measurement”)will influence the recognition and measurement of financial instruments in the balancesheet, would reduce information asymmetry and earnings manipulation. Voluntarydisclosures would also reduce contracting and agency costs (Watts, 2003), which wouldin turn reduce the need to monitor management actions and would lead to lower cost ofcapital (LaFond and Watts, 2008). In a similar vein, Leuz and Verrecchia (2000),Richardson and Welker (2001) and Armitage and Marston (2008) show that higher levelsof accounting disclosure reduce the uncertainty portion of reported financial informationleading to lower cost of capital.
Similar considerations would apply for the provision of voluntary IFRS disclosures inthe UK in the pre-official IFRS adoption period, i.e. 2004. In the UK setting, UK GAAPwas “high quality” and the UK stock market featured sophisticated market participantsand information exchange mechanisms. However, in the 2006 Review of NarrativeReporting by UK Listed Companies, the Accounting Standards Board (ASB) reportedthat, in previous years, UK firms generally did not disclose any non-financial keyperformance indicators or risk-related information with significant decision-usefulness.In the 2007 Narrative Reporting Survey, PricewaterhouseCoopers has shown that ingeneral UK firms did not present adequate quantitative financial information. The 2008Black Sun research reported that only a small percentage of firms communicatedsufficiently their business objectives and strategy or linked their narrative disclosures tonumerical data. In certain cases, UK firms flooded the annual report with immaterialinformation and non-numerical representations of management judgement,
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estimates and assumptions. It follows that the provision of voluntary explanatorydisclosures, including critical information about the upcoming regulatory change fromUK GAAP to IFRSs prior to adoption, would be essential in order to keep the marketinformed. It should be noted that the implementation of IFRSs has led to high qualityfinancial reporting and transparency (Tarca, 2004; Van Tendeloo and Vanstraelen, 2005;Lang et al., 2006; Hung and Subramanyam, 2007; Barth et al., 2008). IFRS adoption hasreduced earnings management and has increased the value relevance of reportedfinancial numbers (Christensen et al., 2007; Iatridis, 2010). Also, the adoption of IFRSsis generally associated with a positive impact on adopters’ stock returns(Armstrong et al., 2010).
Firms’ voluntarism in providing IFRS disclosures, while still using the UK GAAP,and the subsequent familiarity with IFRS rules, would most likely give investorspositive signals about the financial reporting quality of firms (Lang and Lundholm,2000). The motivation of this study relates to the anticipation of the implementation ofIFRSs and the knowledge that companies had prior to adoption about IFRSrequirements and rules, their future obligation to use IFRSs and the differences betweenIFRSs and the UK GAAP. The ICAEW (2007) notes that companies with significantneeds of external financing had familiarised themselves with IFRS requirements earlyand had invested significant resources in training their staff. It would therefore beexpected that companies that prepared themselves, trained their staff and adjusted theirinformation systems would exhibit better reflexes and ability to adapt in the newaccounting environment. The study identifies firms that voluntarily provided IFRSdisclosures prior to the official adoption (voluntary IFRS disclosers thereon), althoughnot obliged, as firms that have developed a degree of familiarity with IFRSs.
In the light of the compulsory implementation of IFRSs by European listed firms thatprepare consolidated accounts, as of 1 January 2005, the study focuses on UK listed firmsand investigates the provision of voluntary IFRS disclosures in the pre-official IFRSadoption period. Before 2005, firms were using the UK GAAP as there was no option ofearly adoption of IFRSs in the UK. Taking into consideration the main differencesbetween IFRSs and UK GAAP that are presented in Section 2.1, the research objectivehere is to examine the relation between voluntary IFRS disclosures and IFRS transitiondifferences among firms that did (not) provide voluntary IFRS disclosures in thepre-adoption period. So, based on positive accounting theory, the study focuses onaccounting choices relating to the provision of voluntary IFRS disclosures and mainlydetermines how such a managerial decision affected companies’ IFRS transition.A crucial question is why managers would choose to voluntarily disclose IFRSaccounting information in the pre-adoption period and what the related financial impactwould be on the value relevance of the reported financial numbers. The motivation of thestudy relates to whether a particular accounting method/rule has real economicconsequences, such that managerial decisions would involve taking action to somehowmanage the accounting change. The study is also motivated by the fact that thetransition to IFRSs would influence firms’ contractual obligations differently. So, thestudy examines whether firms with significant financing needs would be inclined tovoluntarily provide IFRS disclosures in order to reduce uncertainty, restore investors’confidence and obtain financing on better terms (Lambert, 2001).
With respect to IFRS transition attributes, the findings show that voluntary IFRSdisclosers display a greater positive change in equity and earnings. Non-voluntary
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IFRS disclosers exhibit a greater positive change in leverage as well as a decrease inliquidity. Voluntary IFRS disclosers exhibit higher equity and debt financing needsand tend to be audited by a big auditor and be cross-listed. Also, the provision ofvoluntary IFRS disclosures leads to more value relevant accounting measures. Thestudy implies that the voluntary provision of accounting information, especially beforethe official adoption of an accounting regulation, would tend to have favourable effectsfor the disclosing firm in terms of investor relations and implementation of theregulation in the official adoption period.
This paper differs from other related published work as follows. Christensen et al.(2007) have focused on earnings management and value relevance aspects of IFRSimplementation and have compared the pre and post adoption periods. Callao et al.(2007) have focused on code-law in Spain and investigated the impact of IFRSs on keyaccounting variables and the differences between book and market values. Haller et al.(2009) have examined how differences in the accounting treatment of certain items, suchas post-employment benefit obligations and business combinations, have affected firms’financial numbers following the transition to IFRSs. In line with previous literature,Jones and Finley (2011) have studied how the mandatory adoption of IFRSs has affectedfinancial reporting in the EU and Australia. This study extends the previous findingsand links voluntary disclosers with non-voluntary disclosers focusing on whether theprovision of voluntary IFRS disclosures in the pre-official adoption period has actuallyimproved the financial characteristics and IFRS transition attributes of firms in theofficial adoption year. The study also investigates the relation between firm financingneeds and the provision of voluntary IFRS disclosures.
Therefore, the contribution in this study is significant because it essentially providesinsight about whether providing voluntary IFRS disclosures in the pre-IFRS era in acommon-law country has been effective and useful for firms, in terms of theirfamiliarisation with IFRSs and their adoption process. In comparison to code-lawcountries, a common-law country with strong financial reporting structures andinvestor protection mechanisms, such as the UK, would be expected to display a lowerlevel of earnings management and a higher level of accounting quality, as managers areoverall less inclined to manipulate their financial numbers (Renders and Gaeremynck,2007). In general, the study implies that the voluntary provision of accountinginformation, especially before the official adoption of an accounting regulation, wouldtend to have favourable effects for the disclosing firm, in terms of investor relations andactual familiarisation, and (potentially) easier implementation of the regulation in theofficial adoption period.
The structure of the paper is as follows. Section 2 presents the theoreticalconsiderations of the study. Section 3 details the research hypotheses. Section 4describes the datasets. Section 5 discusses the empirical findings, and Section 6 presentsthe conclusions and implications of the study.
2. Background2.1 Differences between IFRSs and UK GAAPThe main differences between IFRSs and UK GAAP are presented below (ASB, 2003;Ormrod and Taylor, 2004).
FRS 3 “Reporting Financial Performance” requires the financial statements to berestated only for fundamental errors. IAS 8 “Accounting Policies, Changes in Accounting
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Estimates and Errors” does not distinguish between fundamental errors and othermaterial errors. IAS 12 “Income Taxes” requires the use of deferred tax on revaluations offixed assets. Under FRS 19 “Deferred Tax”, there is no such requirement.
In contrast to FRS 15 “Tangible Fixed Assets”, which uses historical prices,IAS 16 “Property, Plant and Equipment” requires increases in an asset’s residual valueto be expressed at current prices. Under IAS 17 “Leases”, the recognition of incomefrom finance leases is based on the net investment method, while SSAP 21 “Accountingfor Leases and Hire Purchase Contracts” requires the net cash investment method.
IAS 21 “The Effects of Changes in Foreign Exchange Rates” requires firms totranslate foreign currency denominated profit and loss statements using average ratesof exchange, while SSAP 20 “Foreign Currency Translation” requires the use of closingrates. Under IAS 21, the foreign exchange differences that follow the disposal of aforeign subsidiary should be recorded in the profit and loss statement. In contrast, FRS3 does not allow this treatment.
IAS 28 “Accounting for Investments in Associates” and FRS 9 “Associates and JointVentures” require investing firms to recognise a liability in their balance sheet when aloss-making associate has recorded obligations. FRS 9 displays an exception to thisrule when the investing firm has decided to terminate the business association with theassociate.
Under IAS 39 “Financial Instruments: Recognition and Measurement”, convertibleloan stock should be split into equity conversion rights and debt. Under FRS 4 “CapitalInstruments”, convertible loan stock is treated as a liability, unless the equity and debtcomponents are separable.
IAS 40 “Investment Property” requires investment property to be measured at fairvalues or depreciated cost. If the former is used, the arising differences should berecognised in the profit and loss statement. SSAP 19 “Accounting for InvestmentProperties” requires investment property to be measured at open market values. Anyarising differences should be presented in the statement of total recognised gains andlosses.
2.2 Financing and voluntary accounting disclosuresThe financing decision may be influenced by a number of factors. The amount andtype of debt may be related to different tax obligations and tax shields (Vuong, 2002).Firms that face high financial risk or price volatility may be reluctant to use debtfinancing to avoid debt covenant violation or financial distress risks. Firms mayinfluence their capital structure so as to differentiate themselves from other firms andgive investors a positive signal about their future financial prospects. Informationasymmetry should be taken into consideration, as it would be expected to affectinvestors’ required rates of return and firm value (D’Souza, 1998).
The financing decision is also affected by the risk management strategy of the firm.For example, a firm that is a potential takeover target might increase its debt levels inorder to look less attractive to the bidder (Rajan and Zingales, 1995). Transaction costs alsoplay a significant role in the capital structure process, as different costs would apply forequity and debt issues (Fischer et al., 1989). The financing decision is also influenced by thequality and characteristics of the financial system, such as the level of transparency andfinancial reporting quality, or whether it is a common-law or a code-law system, or whetherstrong or weak investor protection mechanisms are in place (Shanka and Tridip, 2002).
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Financial attributes, such as size, liquid assets, high profitability, ample collateral, etc.would tend to reduce the risk of default and improve firms’ creditability and borrowingterms (Cantillo and Wright, 2000).
The literature shows that firms with large size and high research and developmentand advertising expenditure, tangible assets, cash flows, leverage or dividend payoutare more likely to issue debentures rather than depend on bank loans (Calomiris, 1994).Likewise, Cantillo (2004) indicates that firms that are profitable and viable mightconsider issuing debt to avoid a costly middleman, such as banks. On the other hand,firms with weak financial measures and/or uncertain prospects might need the skillsand experience of a financial intermediary more frequently. Denis and Mihov (2003)suggest that firms tend to choose financial vehicles that move them toward a targetdebt to equity ratio and capital structure.
Kurshev and Strebulaev (2007) have found that large firms tend to have higherleverage than small firms, as the former may have easier access to external financing.Firm size may be used as a proxy for firm asset volatility, as small firms are likely tooperate in relatively more volatile industries or business areas (Chung et al., 2002).Birch et al. (1999) indicate that the age of the firm affects firm financial structure andshow that young growing firms may be able to obtain better terms of financing.Brian et al. (2005) have observed that as small and medium-sized enterprises (SMEs)become more informative, their financing options appear to improve. Berger and Udell(1995) show, however, that SMEs may experience higher financing costs and limitedaccess to financing, which may, in turn, delay their growth.
Voluntary disclosers may be more innovative or sophisticated in implementingaccounting change. Alternatively, they may display better financial results and thus seekto show evidence of their superiority by providing voluntary disclosures (Francis et al.,2008). Kasznik and Lev (1995) have shown that firms publish forecasts more frequently inperiods of bad news. The provision of voluntary accounting disclosures would reduceinformation asymmetry and would smooth the communication between managers andstakeholders (Healy and Palepu, 2001), thereby assisting firms that seek access to stockand debt markets (Renders and Gaeremynck, 2007). Informative accounting disclosureswould promote the efficient allocation of resources in the stock market and would reinforcestock market efficiency (Watts and Zimmerman, 1990). Firms would tend to providevoluntary accounting disclosures when such disclosures are likely to result in minimaladverse economic consequences or maximum positive benefits (Gigler, 1994).
The provision of voluntary accounting disclosures would depend on firms’managerial incentives, investors’ expectations, contracting costs, size, stockownership, etc. (Fields et al., 2001; Cano-Rodriguez, 2010). Dye (1990) has found thatthe provision of voluntary accounting disclosures is associated with the externalitieslinked with disclosures, the risk preferences of shareholders and outside investors, andthe company cash flow structure. The motivation for voluntary disclosures alsoincludes earnings volatility, information asymmetry and growth (Baginski et al., 2002).For example, firms with high financial leverage are likely to provide voluntarydisclosures in order to reinforce their creditability. Large firms would be inclined toprovide voluntary disclosures in order to avoid attracting political attention. Firms thatexperience a change in company management may also provide voluntary disclosuresin order to give positive signals of favourable future prospects.
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Managers compare the short-term and long-term price implications of providingvoluntary disclosures (Langberg and Sivaramakrishnan, 2010). However, in the short run,the disclosure of good news may have a lesser impact on prices than the disclosure of badnews (Kothari et al., 2009). The stock market reaction to voluntary disclosures woulddepend upon the content and usefulness of the reported information (Chen et al., 2007;Bakke and Whited, 2010). Financial analysts’ ratings appear to be positively associatedwith the amount and the quality of disclosure (Gigler and Hemmer, 2001). Firms thatprovide extensive disclosures and value relevant accounting information tend to exhibit asignificant appreciation in their stock returns, which will subsequently reflect firms’actual financial performance and future prospects in a more reliable manner (Healy et al.,1999; Kasznik, 1999; Gelb and Zarowin, 2002). Voluntary disclosers would tend to exhibit alarger analyst following and less dispersion in analyst forecasts (Gelb and Zarowin, 2002).Tying compensation plans and debt covenants to long-term performance measures wouldprovide incentives for firms to provide voluntary disclosures and discourage earningsmanipulation (Langberg and Sivaramakrishnan, 2010).
3. Research hypotheses3.1 Voluntary IFRS disclosures and IFRS transitionFirms that provided voluntary IFRS disclosures in the pre-official adoption period mayhave been more innovative in implementing accounting change. They would beexpected to be more familiar with the requirements of IFRSs and with the differenceswith UK GAAP, as presented in Section 2.1, as well as with the economic consequencesof IFRS adoption. This has also been reinforced by the issue of new accountingstandards and the replacement of existing standards by the ASB prior to officialadoption, in order to enable convergence with IFRSs. It is implied that, to some extent,there was some anticipation of the impact of IFRS implementation on firm accountingnumbers before the official adoption of IFRSs. Firms’ prior experience and awareness ofIFRS characteristics and voluntary reporting of IFRS related disclosures would beexpected to reduce the actual (adverse) impact of IFRS implementation and influence theactual transition effects (Renders and Gaeremynck, 2007). Given the differences betweenIFRSs and the UK GAAP, the study seeks to identify the comparative impact on the IFRStransition process of voluntary and non-voluntary IFRS disclosers. The transition toIFRSs and the subsequent change in adopters’ financial accounts would be expected toaffect company contractual arrangements (Aisbitt, 2006). Here, the study examines themateriality and the direction of the change in company financial position andperformance, which would in turn have a significant effect on company contractualobligations and status. The hypothesis that is tested is as follows:
H1. The financial position and performance of voluntary IFRS disclosers arelikely to display a material positive change by the transition to IFRSs.
To test H1, the study uses Gray’s (1980) comparability index for evaluating thecomparative impact on moving from UK GAAP to IFRSs on equity, earnings, leverageand liquidity (Whittington, 2000; Tsalavoutas and Evans, 2010). Previous studies haveused the comparability index to examine the differences between different GAAPs.For example, Adams et al. (1999) have found that compared to US GAAP, UKGAAP-based net income is higher, while UK GAAP-based shareholders’ equity is lower.Adams et al. (1993) also compared the Finnish GAAP with IASs using the comparability
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index. Weetman et al. (1998) have investigated the differences in measurement rulesbetween IASs and UK and US GAAP. Street et al. (2000) and Haverty (2006) focus on thedifferences between US GAAP-based earnings and IASs. Bertoni and De Rosa (2006)and Lopes and Viana (2007) have, respectively, shown that IASs appear to incorporateless conservatism when compared to the Italian GAAP and the Portuguese GAAP.When comparing the UK GAAP-based earnings to the earnings reported under IFRSs,the comparability index takes the following form:
1 2ðEarnings IFRS 2 Earnings UK GAAPÞ
jEarnings IFRSj
� �ð1Þ
The study uses the IFRSs as a basis of comparison and therefore examines the reporteddifferences between the two GAAPs as a departure from IFRSs, in order to make theresulting findings comparable with studies that investigate the transition of othercountries’ local GAAP to IFRSs (Adams et al., 1999). Similar indices are developed forequity, leverage and liquidity. Weetman et al. (1998) suggest that the difference betweenthe reported earnings under two different GAAPs would be insignificant for values lessthan 5 per cent; potentially significant for values between 5 and 10 per cent; andsignificant for values above 10 per cent. Average comparability index values arecalculated as the sum of all sample firms’ comparability indices divided by the numberof firms under investigation.
In accordance with IFRS 1 “First Time Adoption of International Financial ReportingStandards”, companies should explain in their first IFRS-based financial statementshow IFRS transition affected company financial numbers by providing reconciliationstatements for year 2004. In particular, companies must provide reconciliations of thebalance sheet and income statement from UK GAAP to IFRSs for the date of transition,information on the main adjustments required for the restatement of the cash flowstatement, as well as disclosures of any impairment losses incurred. The reconciliationsmainly focus on the change reported in earnings or shareholders’ equity following thetransition to IFRSs and subsequently present a detailed description of the differences inindividual related items. Horton and Serafeim (2010) report that the timing that thereconciliation statements are issued varies. For example, some firms may disclose theirreconciliations in the first interim or with the final IFRS results for the year. Other firmsmay choose to publish the reconciliations together with major announcements, such asmerger and acquisition decisions, which may be three months after the preliminaryannouncement of their last UK GAAP-based annual report. As firms adopting IFRSs arerequired to restate their prior-year results under IFRSs, the study compares the UKGAAP-based financial numbers, as reported in 2004, with the 2004-restated into IFRSfinancial numbers. The objective of the study is to investigate whether companyfinancial numbers change under IFRSs compared to the UK GAAP in a different mannerfor voluntary IFRS disclosers as opposed to non-voluntary IFRS disclosers.
3.2 Voluntary IFRS disclosures and firm financing needsIFRS implementation would lead to higher financial statement comparability and loweruncertainty and cost of capital, thereby making it easier for firms to obtain debt andequity capital in domestic and international capital markets (Hung and Subramanyam,2007; Barth et al., 2008). It is noteworthy that the International Organization of SecuritiesCommissions has approved the use of IFRSs for cross-border stock exchange listings.
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It follows that firms with strong financing needs may provide IFRS-based information intheir financial statements, in order to impress capital providers, give a signal of highreporting quality and improve their creditability and terms of financing. Being auditedby a big auditor may signify a higher level of compliance and familiarity with IFRSrequirements (Street and Gray, 2002). Hence, firms that are audited by big audit firms(BF) would be likely to provide voluntary IFRS disclosures prior to IFRS adoption(Tarca, 2004). Firms that have international business exposure are also likely to providevoluntary IFRS disclosures, in order to enhance their international financial profile(Dumontier and Raffournier, 1998). Here, the study focuses on the pre-official IFRSadoption period, i.e. 2004, and examines the association between the provision ofvoluntary IFRS disclosures in 2004 and firms’ capital structure and financing needs. Thehypothesis that is tested is as follows:
H2. Firms that provide voluntary IFRS disclosures in the pre-official adoptionperiod are likely to exhibit stronger financing needs.
The study focuses on the capital structure side of firms and uses explanatory variablesincluding borrowing, equity capital, cross-listings, off-balance sheet financing (OBF),foreign revenues (FR), auditing by a big auditor, share trading volume and changes incompany management. The study also uses balance sheet and income statementrelated ratios, regarding size, profitability, growth and leverage. The logit model that isused is as follows:
VDi:t ¼ a0 þ a1Bi;t þ a2Ei;t þ a3CRi;t þ a4OBFi;t þ a5FRi;t þ a6BFi;t þ a7Vi;t
þ a8Mi;t þ a9LNAi;t þ a10ROAi;t þ a11MVBVi;t þ a12TLSFUi;t
þ a13INTCOVi;t þ ei;t
ð2Þ
where:
VDi,t VDi,t ¼ 1 for voluntary IFRS disclosers, and VDi,t ¼ 0 otherwise.
Bi,t Bi,t ¼ 1 for firms that raised debt capital in the pre-official adoptionperiod, and Bi,t ¼ 0 otherwise.
Ei,t Ei,t ¼ 1 for firms that raised equity capital in the pre-official adoptionperiod, and Ei,t ¼ 0 otherwise.
CRi,t CRi,t ¼ 1 for firms that had their shares cross-listed in foreign stockexchanges in the pre-official adoption period, and CRi,t ¼ 0 otherwise.
OBFi,t OBFi,t ¼ 1 for firms that used off-balance sheet financing in thepre-official adoption period, and OBFi,t ¼ 0 otherwise.
FRi,t FRi,t ¼ 1 for firms that had foreign revenues in the pre-official adoptionperiod and FRi,t ¼ 0 otherwise.
BFi,t BFi,t ¼ 1 for firms that were audited by a big auditor in the pre-officialadoption period and BFi,t ¼ 0 otherwise.
Vi,t is the share trading volume scaled by shares outstanding.
Mi,t Mi,t ¼ 1 when changes in company management occurred in thepre-official adoption period and Mi,t ¼ 0 otherwise.
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LNAi,t is the log of total assets.
ROAi,t is net profit to total assets.
MVBVi,t is market value to book value.
TLSFUi,t is total liabilities to shareholders’ funds.
INTCOVi,t is profit before interest and taxation to interest expense.
ei,t is the error term.
3.3 Voluntary IFRS disclosures and value relevanceThe study is exploratory and examines the impact of voluntary IFRS disclosures andspecifically how they could affect the presentation of the financial statements and thetransition to IFRSs. Voluntary IFRS disclosers were likely to have employed consultantsto advise them on the areas mostly affected by IFRS transition. Firms that could estimatethe impact of IFRSs with reasonable certainty would be inclined to report relevantIFRS-impact related disclosures. In contrast, firms that were not yet aware of any suchimpact on their financial position and performance would not be motivated to make IFRSdisclosures prior to official adoption. Alternatively, firms that did not provide voluntaryinformation and decided to simply meet the minimum disclosure requirements may seekto present a favourable picture to the market. The lack of voluntary disclosures on theIFRS impact on company financial statements and the provision of disclosures that do notgo beyond the minimum mandatory required levels indicate that firms are not prepared toassist the users of accounting information in understanding and making judgementsabout their potential financial limitations and prospects (La Porta et al., 2000; Francis et al.,2005; Finch, 2006). The channel of communication between companies and investors,which is used by investors to construct their expectations about a firm’s prospects, wouldafter all be influenced by the costs associated with the related information costs(Gietzmann and Trombetta, 2003). Following the discussion presented in Section 2.2, firmsdisclosing IFRS information on a voluntary basis would be expected to exhibit higherquality accounting measures. The hypothesis that is tested is as follows:
H3. Accounting measures reported by voluntary IFRS disclosers are likely toexhibit higher value relevance.
To test H3, the study uses the model below, where the dependent variable is shareprice and the independent variable is net profit per share (NPPS) (Lang et al., 2003,2006; Barth et al., 2008; Hung and Subramanyam, 2007):
Pi;t ¼ a0 þ a1BVPSi;t þ a2NPPSi;t þ ei;t ð3Þ
where:
Pi,t is total market value of equity at year-end scaled by number of sharesoutstanding.
BVPSi,t is total book value of equity scaled by number of shares outstanding.
NPPSi,t is total net profit scaled by number of shares outstanding.
ei,t is the error term.
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Further, the study employs an additional model, where the dependent variable is profitsand the independent variable is stock returns (Barth et al., 2008; Lang et al., 2006):
NPPi;t ¼ a0 þ a1ARi;t þ ei;t ð4Þ
where:
NPPi,t is net profit divided by beginning of year share price.
ARi,t is the annual stock return at year-end.
ei,t is the error term.
For all value relevance tests described above, the study investigates the valuerelevance of financial numbers of voluntary and non-voluntary IFRS disclosersreported in the pre-official adoption year 2004. In the period prior to official adoption,firms had the choice to (voluntarily) present IFRS-related information or to limit theirdisclosure practices to those prescribed by the UK GAAP. After the adoption of IFRSs,firms had to abide by IFRS regulation and to report IFRS disclosures. The comparisonof financial numbers prepared for the same year would allow the direct investigation ofthe value relevance of the two different sets of firms.
4. DatasetsThe study covers the period January 2004 to December 2005. Accounting data werecollected from DataStream. Information about the accounting policies, the financingneeds and the provision of voluntary IFRS disclosures of the sample firms wasobtained from the Financial Times Annual Report Service. The need to match thesample of companies electronically available on the Financial Times Annual ReportService with those available on DataStream for the period under investigation hasrounded the sample size down to 229 firms. The study has used companies withDecember year-ends. In total, 134 sample firms have voluntarily disclosed IFRS-relatedfinancial information and quantifications in the pre-official adoption period.
The categorisation of firms into voluntary and non-voluntary IFRS disclosers isbased on the (non-mandatory) provision of material IFRS information prior to adoptionabout the upcoming adoption of IFRSs in 2005. Before 2005, UK firms implemented theUK GAAP and had no obligation to disclose IFRS-related information. Companycategorisation is particularly based on the construction of an index similar to thedisclosure index formulated by the Center for International Financial Analysis andResearch (1995). Each sample firm obtains a score, with a higher score reflecting a moresignificant level of disclosure. The disclosure items that this study investigated relate togeneral IFRS information, income statement, balance sheet, cash flow statement,accounting policies, shareholders’ disclosures, notes to the accounts and otherexplanatory IFRS information. Similar company categorisations have been used instudies, such as Rajan and Zingales (1998), Hope (2003), Bushman et al. (2004),Francis et al. (2005) and Shi et al. (2009). It is vital to note that the above presentedvoluntary disclosures reported in annual reports in the period prior to adoption, i.e. 2004,are different to the mandatory disclosures required on transition to IFRSs and containedin the reconciliation statements, which follow the issue of the last UK GAAP-basedannual report and have been described in Section 3.1.
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Appendix 1 presents the sample industrial sectors. The study has excluded financialinstitutions, banks, pension and brokerage firms, as their accounting measures are notalways comparable with those of industrial firms. Appendix 2 provides descriptions ofthe accounting variables used in the empirical analysis.
5. Empirical findings5.1 Descriptive statisticsTable I shows that voluntary IFRS disclosers display higher growth (MVBV) andreturn on asset (ROA) in 2005 compared to 2004. Voluntary IFRS disclosers alsodisplay higher leverage (TLSFU) and a higher interest cover ratio (INTCOV) in 2005.Non-voluntary IFRS disclosers exhibit higher growth (MVBV) in 2005 as opposed to2004. They also display lower ROA and higher leverage (TLSFU). Their interest coverratio (INTCOV) displays a small decrease in 2005. Comparing voluntary IFRSdisclosers with non-voluntary IFRS disclosers in 2005, Table I indicates that the formertend to be larger (LNA) and display higher growth (MVBV). Voluntary IFRS disclosersalso exhibit higher ROA, leverage (TLSFU) and interest cover (INTCOV).
Table II presents the correlation matrix of the variables that are used in the study.It shows that the statistically significant correlation coefficients are generally nothigh and close to zero. For example, size (LNA) is positively correlated to ROAand leverage (TLSFU), as large companies might be more profitable and carryhigher debts due to operating and financing reasons, but the correlation coefficients are
Voluntary IFRSdisclosers 2004
Voluntary IFRSdisclosers 2005
Non-voluntaryIFRS disclosers
2004
Non-voluntaryIFRS disclosers
2005Variables Mean SD Mean SD Mean SD Mean SD
SizeLNA 3.769 1.170 3.938 1.621 2.407 1.768 2.719 1.711ProfitabilityROA 0.062 0.173 0.088 0.207 0.048 0.317 0.030 0.227GrowthMVBV 2.323 1.678 2.753 1.921 1.563 1.001 1.924 1.224LeverageTLSFU 1.279 2.377 1.840 2.197 1.419 2.185 1.770 2.222INTCOV 1.387 0.629 1.739 0.930 1.124 0.496 1.089 0.547
Table I.Descriptive statistics
LNA MVBV ROA INTCOV TLSFU
LNA 1 0.034 0.110 * * * 20.002 0.083 *
MVBV 0.034 1 0.117 0.190 20.101ROA 0.111 * * * 0.117 1 20.004 20.271 * *
INTCOV 20.002 0.190 20.004 1 20.001TLSFU 0.083 * 20.101 20.271 * * 20.001 1
Notes: Statistical significance at: *10, * *5 and * *1 per cent levels (two-tailed), respectivelyTable II.Correlation matrix
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only 0.110 and 0.083, respectively. In a similar vein, leverage (TLSFU) is negativelycorrelated to ROA, but the correlation coefficient is only 20.271.
5.2 Comparability indices and relative financial impactTable III indicates that, following IFRS adoption, the change in the financial measuresof IFRS adopters tends to be materially positive for those that previously providedvoluntary IFRS disclosures, implying that H1 holds. Table III shows that the transitionto IFRSs has affected the equity of voluntary IFRS disclosers positively (55.2 per centover 44.8 per cent). About 29.1 per cent displays a material positive change.For 13.4 per cent of voluntary IFRS disclosers, the impact has been materially negative.For non-voluntary IFRS disclosers, it appears that 51.5 per cent of the sample hasexperienced a positive change. In contrast, 48.5 per cent has displayed a negativechange, while 17.9 per cent has exhibited a material negative change.
With respect to the impact on earnings, 57.5 per cent of voluntary IFRS disclosershave displayed a positive change, in contrast to the 52.2 per cent of non-voluntary IFRSdisclosers. The earnings of 32.1 per cent of voluntary IFRS disclosers (18.7 per cent ofnon-voluntary IFRS disclosers) have been affected in a materially positive manner,while 16.4 per cent of voluntary IFRS disclosers (14.2 per cent of non-voluntary IFRSdisclosers) have displayed a material negative impact.
Table III indicates that, for leverage, 74.6 per cent of non-voluntary IFRS disclosershave displayed a positive change, 50 per cent of which was material. In contrast,59.7 per cent of voluntary IFRS disclosers displayed an increase, out of which41 per cent was material. About 40.3 per cent of voluntary IFRS disclosers displayed anegative change as opposed to 25.4 per cent for non-voluntary IFRS disclosers.
About 61.2 per cent of non-voluntary IFRS disclosers have exhibited a decrease inliquidity. About 38.1 per cent has displayed a material decrease. Only 11.2 per cent offirms that exhibited a positive change experienced a material increase. On the otherhand, voluntary IFRS disclosers demonstrated a marginal change. About 51.5 per centhas displayed a positive change, while 48.5 per cent has presented a negative change.The percentage of firms that experienced a material increase amounts to 21.6 per cent,while those that exhibited a material decrease amount to 25.4 per cent.
Overall, voluntary IFRS disclosers have experienced a greater positive change inequity and earnings than non-voluntary IFRS disclosers. Both sets of firms havedisplayed a positive change in leverage, however, non-voluntary IFRS disclosersappear to exhibit a greater increase. It is notable that non-voluntary IFRS disclosersdemonstrated a decrease in liquidity, most likely due to the higher increase in leveragethat they displayed, which may in turn impede their debt-paying ability (Aisbitt, 2006).On the other hand, voluntary IFRS disclosers presented an increase in liquidity.
5.3 Voluntary IFRS disclosures and firm financing needsFocusing on the pre-official IFRS adoption period, i.e. 2004, and the motivation toprovide voluntary IFRS disclosures, the study shows that H2 holds, implying thatvoluntary IFRS disclosers tended to exhibit stronger financing needs in 2004. Table IVshows that, in 2004, voluntary IFRS disclosers issued debt capital (B) and equitycapital (E). As expected, their leverage ratio (TLSFU) likewise appears to be higher inthat year. Voluntary IFRS disclosers also tended to have their shares cross-listed (CR)on foreign stock markets. To raise capital in stock and debt markets, firms would be
Voluntary IFRSdisclosures
585
EQ
CI
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AC
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TL
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UK
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11.
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Non-voluntary
IFRSdisclosers
UK
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AP
less
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ofIF
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s(m
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chan
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1515
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4850
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bet
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95p
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2122
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bet
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37
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1(t
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48.5
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GA
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4p
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s(i
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1818
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Table III.Comparability indicesand relative financialimpact
MAJ27,6
586
inclined to provide voluntary IFRS disclosures in order to give assurance to domesticand foreign investors about the superiority of their financial reporting (Dumontier andRaffournier, 1998; Cohen, 2004; Lang et al., 2006; Van Tendeloo and Vanstraelen, 2005).Indeed, the literature supports the findings presented above and argues that IFRSs andthe provision of IFRS-based information would reduce information asymmetry anduncertainty between users of accounting information, meet investors’ needs and give apossibly smoother access to money and stock markets (Murphy, 1999; Botosan andPlumlee, 2002). Firms that have FR are also inclined to provide voluntary IFRSdisclosures, in order to give assurance to foreign customers and markets of thesuperiority and transparency of their accounting system.
Voluntary vs non-voluntary IFRS disclosure 2004 UK GAAP-based financial numbersVariables Coefficients
B 0.025 *
(0.013)E 0.057 * * *
(0.021)CR 0.768 * * *
(0.315)FR 0.150 * * *
(0.044)BF 2.396 * * *
(0.612)OBF 0.019 *
(0.011)V 0.078 *
(0.048)M 2.226 *
(1.318)LNA 0.069 * *
(0.030)ROA 0.341
(6.859)MVBV 0.089 * * *
(0.027)TLSFU 0.350 * *
(0.175)INTCOV 0.007
(0.047)Constant 0.166
(1.083)Model x 2 17.212 * *
Per cent correctly classified 68.2 *
Sample size n0 ¼ 95, n1 ¼ 134
Notes: Statistical significance at: *10, * *5 and * * *1 per cent levels (two-tailed), respectively; all theexplanatory variables were entered/removed from the logistic regression with a p-value of 0.05 to enterand a p-value of 0.10 to remove; the Wald statistic was used to test the null hypothesis that eachcoefficient is zero
Table IV.Logistic regression
analysis: firmfinancing needs
Voluntary IFRSdisclosures
587
Firms that are audited by BF are likely to be more familiar with the requirements andcontent of IFRSs, and hence are able to provide voluntary IFRS disclosures, possiblyimplying lower IFRS compliance costs in the official adoption period. However, theexamination of whether firms that are audited by BF are faced with lower IFRScompliance costs in the official adoption period falls outside the scope of the study andshould be an object for future research. Alternatively, it may be that firms providevoluntary IFRS disclosures, in order to attract the interest of the BF, whose auditing canin turn provide an assurance of validity and quality of firms’ reported financialinformation (Chaney et al., 2003). In the light of the fair value orientation of IFRSs,voluntary IFRS disclosers appear to resort to OBF, mainly futures, forwards, optionsand swaps, possibly to strengthen themselves against the implied volatility that mightarise, due to the use of fair values, and smooth the transition to and subsequentimplementation of IFRSs. Voluntary IFRS disclosers also demonstrate a higher sharetrading volume (V). This shows that the provision of voluntary disclosures attractsinvestors’ attention as reflected by the higher trading volume. Voluntary IFRS disclosersexperience a change in company management (M), indicating that the new managementseeks to report informative disclosures to investors to obtain their confidence anddifferentiate themselves from their predecessors (Elliott and Shaw, 1988; Francis et al.,1996). Table IV also shows that firms that provided voluntary IFRS disclosures in thepre-adoption period tend to be larger (LNA) and exhibit higher growth (MVBV). Theirhigher growth may perhaps explain their stronger financing needs.
5.4 Voluntary IFRS disclosures and value relevanceTable V examines the value relevance of the accounting measures reported byvoluntary and non-voluntary IFRS disclosers. The findings indicate that H3 holds,
Non-voluntary IFRS disclosers Voluntary IFRS disclosersVariables Coefficients Variables Coefficients
Panel A: OLS regression of price on book value per share and NPPS (2004 UK GAAP-based financialnumbers)NPPS 0.034 *
(0.019)NPPS 1.98 * *
(0.960)BVPS 0.128 * *
(0.057)BVPS 0.495 * * *
(0.193)Constant 0.012
(0.252)Constant 0.186
(0.347)Adjusted R 2 0.248 0.532Sample size n ¼ 95 n ¼ 134Panel B: OLS regression of net profit deflated by price on stock returns (2004 UK GAAP-based financialnumbers)AR 0.832 *
(0.451)AR 2.528 * *
(1.179)Constant 0.049
(0.064)Constant 0.431
(0.027)Adjusted R 2 0.122 0.312Sample size n ¼ 95 n ¼ 134
Notes: Statistical significance at: *10, * *5 and * * *1 per cent levels (two-tailed), respectively
Table V.Value relevance:voluntary vsnon-voluntary IFRSdisclosers
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588
suggesting that voluntary IFRS disclosers are likely to exhibit accounting measures ofhigher value relevance. Based on the higher R 2 and the larger significantly positivecoefficients of NPPS, book value of equity per share (BVPS) and annual stock returns(AR), Panels A and B show that the financial numbers reported by voluntary IFRSdisclosers tend to be more value relevant compared to those reported by non-voluntaryIFRS disclosers.
6. Conclusions and implicationsIn the light of the compulsory implementation of IFRSs in 2005, the study examineshow the provision of voluntary IFRS disclosures in the pre-official adoption period hasaffected the IFRS transition process of voluntary and non-voluntary IFRS disclosers.The study also investigates whether firms with strong financing needs would beinclined to provide voluntary IFRS disclosures, and examines whether the provision ofsuch voluntary disclosures in the pre-adoption period leads to more value relevantnumbers.
Given that the decision to provide (or not) IFRS-based information in thepre-adoption period would affect investors’ perceptions in a different manner, it followsthat this decision would be important for a firm and would be driven by the firm’sfinancial and managerial objectives. Using Gray’s (1980) comparability index, thestudy has found that voluntary IFRS disclosers have generally experienced a positivechange while moving to IFRSs. Compared to non-voluntary IFRS disclosers, voluntaryIFRS disclosers display a greater positive change in equity and earnings under IFRSsas opposed to UK GAAP. Non-voluntary IFRS disclosers exhibit a greater positivechange in leverage than voluntary IFRS disclosers and a decrease in liquidity.
Firms that disclosed IFRS-related information in the pre-official IFRS adoptionperiod tended to exhibit stronger financing needs. Voluntary IFRS disclosers hadissued debt and equity capital, while they had their shares cross-listed on foreign stockmarkets. They also used OBF, as a means of getting access to capital sources withoutburdening their balance sheet, or mitigating any adverse volatility effects that mightstem from the fair value orientation of IFRSs. IFRSs are information-oriented and seekto meet the needs of market participants (Barth et al., 2008; Lang et al., 2006; VanTendeloo and Vanstraelen, 2005; Hung and Subramanyam, 2007). Hence, firms wouldprovide IFRS-related information in order to reduce uncertainty and give assurance todomestic and foreign investors about the quality of their financial reporting. Further,voluntary IFRS disclosers had significant international exposure, as shown by theirFR, and tended to be audited by a big auditor. In addition, a change in companymanagement would as well encourage firms to provide voluntary disclosures. Thestudy also shows that voluntary IFRS disclosers are larger and visible in the marketand display a significant growth potential. The study finally shows that the provisionof voluntary IFRS disclosures leads to more value relevant accounting measures.
The study explains managerial behaviour with respect to the managerial choice todisclose voluntary accounting information. The study implies that firms would tendto provide voluntary (IFRS) disclosures when it is managerially beneficial. The need toobtain financing on better terms would motivate managers to provide voluntary (IFRS)disclosures to show that they are familiar with the upcoming regulatory change andready to implement it when it becomes effective. This would imply that voluntarilyproviding unfavourable and financially adverse disclosures would improve firms’
Voluntary IFRSdisclosures
589
financial credibility. Voluntary disclosures would also motivate managers to focus onproblematic areas and improve their financial position. This would tend to be moreintensive in countries with strong investor protection mechanisms where the demandfor public disclosure is stronger.
This study may be useful for accounting regulators and other market participants,as it stresses that voluntarism and the provision of useful (IFRS) information affectcompanies’ regulatory (IFRS) transition and the value relevance of the reportedfinancial numbers. Knowing about different firms’ transition experience would assistaccounting standard setters in issuing explanatory IFRS guidance in order to lead to anefficient transition to IFRSs for countries that intend to adopt IFRSs or perform anaccounting change. This would be more evident especially for countries outside theEuropean Union that have decided to voluntarily adopt IFRSs. This choice woulddepend on whether their financial and non-financial situation is expected to improveafter adopting IFRSs. Thus, the examination of IFRS transition for firms that haveexperienced the change is important and would provide insight to firms consideringthis option. The findings further assist accounting academics and students,accountants and investors in their effort to study the motivation for providingvoluntary disclosures as well as the magnitude and materiality of IFRS transition oncompanies’ financial accounts.
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Appendix 1
Ind
ust
ryN
o.of
firm
s
Aer
osp
ace
and
def
ence
7A
uto
mob
iles
3B
ever
ages
4C
hem
ical
s4
Con
stru
ctio
nan
db
uil
din
gm
ater
ials
16E
lect
rici
ty1
En
gin
eeri
ng
and
mac
hin
ery
11F
ood
and
dru
gre
tail
ers
3F
ood
pro
du
cers
and
pro
cess
ors
4G
ener
alre
tail
ers
2H
ealt
h8
Hou
seh
old
goo
ds
and
tex
tile
s7
Info
rmat
ion
tech
nol
ogy
har
dw
are
7L
eisu
reen
tert
ain
men
tan
dh
otel
s7
Med
iaan
den
tert
ain
men
t16
Min
ing
12O
ilan
dg
as17
Per
son
alca
rean
dh
ouse
hol
dp
rod
uct
s1
Ph
arm
aceu
tica
lsan
db
iote
chn
olog
y12
Rea
les
tate
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oftw
are
and
com
pu
ter
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ices
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up
por
tse
rvic
es28
Tel
ecom
mu
nic
atio
ns
serv
ices
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ran
spor
t7
Uti
liti
es3
Tot
al22
9
Table AI.Sample industrial sectors
Voluntary IFRSdisclosures
595
Appendix 2
Size
LN
AL
ogof
tota
las
sets
Profitability
RO
AR
etu
rnon
asse
tGrowth
MV
BV
Mar
ket
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ue
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ook
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ue
Leverage
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otal
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ilit
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ds
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tb
efor
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tere
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ion
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tere
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pen
seCom
parabilityindices
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CI
Eq
uit
yco
mp
arab
ilit
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dex
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nin
gs
com
par
abil
ity
ind
exT
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IL
ever
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par
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ity
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ex,
wh
ere
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erag
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ned
asto
tal
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ilit
ies
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ds
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uid
ity
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par
abil
ity
ind
ex,
wh
ere
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uid
ity
isd
efin
edas
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ent
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tsto
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ent
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ilit
ies
Other
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rms
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edd
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ital
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ep
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ffici
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uit
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tion
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had
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rsh
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ock
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-of
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inth
ep
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ffici
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ng
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ing
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um
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aled
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ench
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ym
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ise
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ares
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otal
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eof
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ity
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ated
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mb
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tsta
nd
ing
AR
An
nu
alst
ock
retu
rnat
yea
r-en
d
Table AII.Accounting measuresused as explanatoryvariables
MAJ27,6
596
About the authorDr George Emmanuel Iatridis is an Assistant Professor of Accounting and Finance at theDepartment of Economics, University of Thessaly, Greece. He is also a member of the GreekAccounting and Auditing Oversight Board, Ministry of Economics. He has worked as a Lecturerin Accounting and Finance at the School of Accounting and Finance, University of Manchester,UK. He has also taught at the University of Athens and the University of Manchester Institute ofScience and Technology (UMIST). He studied Accounting and Finance at postgraduate level atthe Universities of Manchester (PhD) and Southampton (MSc). Before graduate school, he studiedEconomics at the University of Athens, Greece. He has worked on a number of internationalresearch projects relating to financial accounting. He teaches on postgraduate programmes andserves on the editorial advisory boards of various academic journals. His current researchinterests mostly relate to the economic consequences of the implementation of internationalfinancial reporting standards in the UK and other major European and non-European countries,accounting policy choice, earnings quality and earnings conservatism. George EmmanuelIatridis can be contacted at: [email protected]
Voluntary IFRSdisclosures
597
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