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1、Effects of International Financial Reporting Standards on the Accounts and Accounting Quality of Australian FirmsKamran Ahmeda, John Goodwinb*a Department of Accounting, La Trobe University, Melbourne, Vic, 3083, Australiab School of Accounting and Law, RMIT University, Melbourne, Vic, 3000, Austral
2、iaAbstractThis study examines the effect of Australian equivalents to International Financial Reporting Standards (AIFRS) for 1,387 listed firms over 2004 and 2005. We document and analyse the effects of the most significant changes from AIFRS on earnings and equity and the changes to various financ
3、ial statement numbers and ratios. We find that AIFRS earnings is higher and equity is lower than AGAAP, and more firms have earnings decreases than increases. The effect on ratios is most significant for leverage where the AIFRS ratio is higher. We find little evidence that AIFRS earnings and book v
4、alue are more value relevant than AGAAP earnings and book value and this result holds for partitions of industry sector, firm size and profit and loss-making firms. There is weak evidence of incremental value relevance of AIFRS accounting information.Key words: IFRS adoption, accounting quality, acc
5、ount effects* Corresponding author.Email addresses: k.ahmedlatrobe.edu.au (K. Ahmed), john.goodwinrmit.edu.au (J. Goodwin)1. IntroductionThis study examines the effects of Australian equivalents to International Financial Reporting Standards (AIFRS) on the accounts of 1,387 listed entities, which is
6、 over 80 percent of the listed firm population at January 2006. AIFRS are applicable for reporting periods beginning after 31 December 2004, and entities are required to restate comparatives and provide reconciliations to Australian generally accepted accounting principles (AGAAP) upon first-time ad
7、option. The time of initial adoption is an appropriate time for assessing the impact of this major change in reporting rules since firms provide earnings and equity amounts measured under two different GAAP for the same periods. We compare the AIFRS numbers with those under AGAAP for the period imme
8、diately prior to AIFRS adoption, There are some standards exempt from retrospective application, namely the two financial instruments standards (AASB 132 and AASB 139), AASB 3 Business Combinations and the three insurance standards (AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts a
9、nd AASB 1038 Life Insurance Contracts). focussing on earnings and the balance sheet. There seems to be general agreement among commentators, the firms, analysts and the wider community that the introduction of AIFRS will materially affect some Australian entities. Consistent with this are the shareh
10、older briefings held by some firms (e.g. Telstra and Alinta), to explain the financial impact of AIFRS on the firms accounts. For example, the head of the Australasian Investor Relations Association, Mr Ian Matheson, said in June 2005; In some cases, the IFRS changes will have a material bearing on
11、the companies reported results” (Buffini, 2005, 6). There is no empirical evidence on this issue.There are also different opinions on the economic consequences of AIFRS. In particular, public opinion differs on accounting quality, cost of capital, capital raising ability and the costs of implementat
12、ion. We also examine in this paper the differences in accounting quality of AIFRS applying a relative value relevance approach and we examine incremental value relevance. Perhaps the loudest voice for improved quality from AIFRS is the Financial Reporting Council (FRC) who, in 2002, claimed that the
13、 standards will enhance “the overall quality of financial reporting in Australia” (FRC, 2002). This view is supported by the Australian Accounting Standards Board (AASB) in a 2003 press release: “Complying with these requirements is unlikely to impose significant burdens and costs on entities when c
14、ompared with the benefits of relevant and reliable information to users of financial reports.” (Fenton-Jones, 2003, 53). In contrast to the FRCs view, Professors Frank Clarke and Graeme Dean of The University of Sydney suggested in March 2005, that AIFRS will mislead investors because of the Parliam
15、entary Joint Committee on Corporations and Financial Services conclusion in February 2005, that AIFRS are Corporations Act compliant. Specifically, they argue that investors can not rely on a firms accounts under AGAAP as being true and fair, since AIFRS compliant accounts are consistent with a true
16、 and fair view (Clarke and Dean, 2005). There is no Australian evidence on the impact of AIFRS that can shed light on the abovementioned debate on the effect of AIFRS and its consequences for accounting quality. One objective of this study is to investigate the effect of AIFRS on earnings and equity for the average Australian listed firm. This is important since better predictions can be made for the effects
