Compliance With International Financial Reporting Standards and Value Relevance of Accounting Information in South Africa

Abstract

The objective of the study is to investigate the relationship between the International Financial Reporting Standard (IFRS 1) and the value relevance (VR) of accounting information. In this study forty-six companies listed on the Johannesburg Stock Exchange during the period 1993 to 2017. Panel data is used to compare the period before and after IFRS. The companies in the sample are composed of the following sectors; mining, manufacturing, banks and investment companies, real estate, general industry, retailers, construction and material, chemical and software, and computers. Based on the yearly financial reports published by public companies in South Africa, the study employed the Cookes (1992) Unweighted Disclosure Index to measure the level of compliance in South Africa. Fifty-six disclosure elements from IFRS 1 were utilized to measure the compliance level. Thereafter Ohlson (1995) Model is used with dummy variables to compare the pre-and post-IFRS period. First, the study reflected that most of the South African companies exhibit higher compliance rates ranging from 87 to 93.417 which is impressive. On the other hand, 4 companies recorded Medium level compliance that is between 60% to 79% compliance level. The findings further revealed that there is a significant positive association between compliance with IFRS 1 and the value relevance of accounting information.