The Value Relevance of Adopting IFRS or U.S. GAAP for The Cross-listed Financial Firms in the United States
Date Issued
2010
Date
2010
Author(s)
Lee, Wei-Tze
Abstract
Although there is an active process to achieve convergence, the debates of the difference between IFRS and U.S. GAAP also put the IASB under tremendous pressure to conform IFRS to arguably a "lesser-quality" answer under U.S. GAAP. To provide evidences for the debates, this study investigates the market valuation of earnings and book value amounts prepared under IFRS and U.S. GAAP. Using 2004 to 2006 reconciliation disclosures of all financial cross-listed firms in the United States, I find that the U.S. GAAP earnings reconciliation adjustment is value relevant and that U.S. GAAP amounts are valued different for market value and return models. U.S. GAAP appears to be a better performance measure as reflected by the market value than IFRS. I also divide the reconciliation adjustment into 16 categories, and find that we observe that the categories where the reconciling items had the greatest impact in shareholders‘ equities were investments-infrastructure followed by capital-liabilities and equities and intangibles. The reconciling items that had the most influence on net income were investments-infrastructure, cash and benefits and capital-liabilities and equities.
Subjects
convergence
U.S. GAAP
IFRS
20-F reconciliations
financial industry
adoption
Type
thesis
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