Compliance with the Disclosure Requirements of Germany's New Market: IAS Versus Us Gaap

37 Pages Posted: 19 Mar 2003

See all articles by Martin Glaum

Martin Glaum

WHU - Otto Beisheim School of Management

Donna L. Street

University of Dayton - Accounting

Abstract

This research examines compliance with both International Accounting Standards (IAS) and United States Generally Accepted Accounting Principles (US GAAP) for companies listed on Germany's New Market. Based on a sample of 100 firms that apply IAS and 100 that apply US GAAP, we investigate the extent to which companies comply with IAS and US GAAP disclosure requirements in their year-2000 financial statements. Compliance levels range from 100% to 41.6%, with an average of 83.7%. The average compliance level is significantly lower for companies that apply IAS as compared to companies applying US GAAP. This study provides the first systematic evidence regarding the enforcement of US GAAP outside the US, and accordingly not subject to Securities Exchange Commission (SEC) review. The results unveil a considerable extent of non-compliance. The overall level of compliance with IAS and US GAAP disclosures is positively related to firms being audited by Big 5 auditing firms and to cross-listings on US exchanges. Compliance is also associated with references to the use of International Standards of Auditing (ISA) or US GAAS in the audit opinion. The findings add to the growing concerns regarding the lack of effective supervision in the German capital market.

JEL Classification: M41, M44, M47, M49

Suggested Citation

Glaum, Martin and Street, Donna L., Compliance with the Disclosure Requirements of Germany's New Market: IAS Versus Us Gaap. Available at SSRN: https://ssrn.com/abstract=388524

Martin Glaum (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar
Germany
+49 261 - 6509-315 (Phone)

Donna L. Street

University of Dayton - Accounting ( email )

Dayton, OH 45469
United States

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