Abstract
<p><strong>Purpose-</strong>The main objective of this study is to provide a judgment on the comparability of financial statements prepared under IFRS and US-GAAP. We developed two research questions for evaluating comparability within Europe (IFRS) and within the US (US GAAP) and for testing whether comparability is higher or lower when the US companies are included with the European countries.</p><p><strong>Design/Methodology/Approach-</strong>The T index framework was used to summarize the level of comparability for 13 accounting items using data from 250 companies.</p><p><strong>Findings</strong>-Empirical results are mixed. Of 13 accounting items considered, international comparability is significantly lower for 7 items and significantly higher for 4 items when the US companies are included. Furthermore, comparability amongst companies using IFRS is not consistently higher or lower than comparability amongst companies using US GAAP.</p><p><strong>Practical implications</strong>-Answers to the research questions may provide useful suggestions for IASB’s current policy direction towards global accounting standards convergence, and in particular for the IASB-FASB convergence project. The results also have implications for companies or countries considering shifting to IFRS or US GAAP.</p><p><strong>Research limitations/implications</strong>-Lack of comparability within countries, rather than between countries, suggests a need to focus on reducing options within standards rather than on differences between standards or countries.</p><strong>Originality value</strong>-Our empirical results show that in most cases lack of comparability may be driven by options within a standard rather than by explicit differences between standards.
Highlights
The recent process of accounting harmonisation made possible by the adoption in 2005 of International Financial Reporting Standards (IFRS) represents the beginning of a practice tending to overcome the accounting differences not just at European level but more generally on a worldwide scale for the progressive adoption of a common global accounting language (Mc Gregor, 1999; Erikson, Esplin, & Maines, 2009; Price Waterhouse Coopers (PWC), 2010; Wagenhofer, 2009; Upton, 2010)
The recent process of accounting harmonisation made possible by the adoption in 2005 of IFRS represents the beginning of a practice tending to overcome the accounting differences not just at European level but more generally on a worldwide scale for the progressive adoption of a common global accounting language (Mc Gregor, 1999; Erikson, Esplin, & Maines, 2009; Price Waterhouse Coopers (PWC), 2010; Wagenhofer, 2009; Upton, 2010). It emerges a super partes need for a project of convergence between the European discipline IAS/IFRS with the American accounting principles US Generally Accepted Accounting Principles (GAAP), which justifies the progressive harmonisation of these two accounting systems (Tarca, 2005; Schipper, 2005; Callagan & Treacy, 2007; Hail, Leuz, & Wysocki, 2010a)
The extent to which the addition of US companies to European companies reduces comparability adds insights into the consequences of having two standards. These issues are summarised with the following two research questions concerning the level of comparability in the financial statements of companies: 1) Is comparability higher or lower within Europe countries (IFRS) or within the US (US GAAP)?
Summary
The recent process of accounting harmonisation made possible by the adoption in 2005 of IFRS represents the beginning of a practice tending to overcome the accounting differences not just at European level but more generally on a worldwide scale for the progressive adoption of a common global accounting language (Mc Gregor, 1999; Erikson, Esplin, & Maines, 2009; Price Waterhouse Coopers (PWC), 2010; Wagenhofer, 2009; Upton, 2010) It emerges a super partes need for a project of convergence between the European discipline IAS/IFRS with the American accounting principles US GAAP, which justifies the progressive harmonisation of these two accounting systems (Tarca, 2005; Schipper, 2005; Callagan & Treacy, 2007; Hail, Leuz, & Wysocki, 2010a). These issues are summarised with the following two research questions concerning the level of comparability in the financial statements of companies: 1) Is comparability higher or lower within Europe countries (IFRS) or within the US (US GAAP)?
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