Changes in Value Relevance of Accounting Information Upon IFRS Adoption: Evidence from Australia

Posted: 4 Feb 2012

See all articles by Keryn Chalmers

Keryn Chalmers

Monash University - Department of Accounting

Greg Clinch

Macquarie Business School

Jayne M. Godfrey

University of Auckland

Date Written: August 25, 2011

Abstract

We investigate whether the adoption of IFRS increases the value relevance of accounting information for firms listed on the Australian Securities Exchange. Using a longitudinal study that covers pre-IFRS and post-IFRS periods during 1990-2008, we find that earnings become more value-relevant whereas the book value of equity does not. This impact is concentrated in the subsamples of industrial firms, both large and small, and firms reporting an AGAAP-IFRS accounting reconciliation upon IFRS adoption. Consistent with an increase in the value relevance of earnings, earnings also become more persistent around IFRS adoption. Our study suggests that even for a country categorized by strong investor protection and high-quality financial reporting and enforcement, IFRS adoption affects the associations between accounting information and market value.

Keywords: Accounting Information, IFRS, Value Reference

JEL Classification: M40, M41

Suggested Citation

Chalmers, Keryn and Clinch, Greg and Godfrey, Jayne M., Changes in Value Relevance of Accounting Information Upon IFRS Adoption: Evidence from Australia (August 25, 2011). Australian Journal of Management, Vol. 36, No. 2, 2011, Available at SSRN: https://ssrn.com/abstract=1998187

Keryn Chalmers (Contact Author)

Monash University - Department of Accounting ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61-3-9903-2867 (Phone)
+61-3-9903-2422 (Fax)

Greg Clinch

Macquarie Business School ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
United States

Jayne M. Godfrey

University of Auckland ( email )

12 Grafton Road
Auckland, 1010
New Zealand

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