Determinants Influencing the De Facto Comparability of European IFRS Financial Statements

Abstract

This paper investigates whether or not European listed companies make use of the options offered by the IFRS and if so, which determinants influence these choices. In order to do this, the choices of 79 companies from Belgium, Germany, the Netherlands and the UK operating in the industries industrial goods and services or technology were manually collected and analyzed. The determinants investigated were: country, industry, company size, capital structure, profitability, stock exchange and auditor. The contribution of the paper is threefold. If the results reveal that options are not used differently, this shows that European IFRS financial statements are de facto comparable. Furthermore, options that are not used can be removed in order to simplify the IFRS. If the results reveal that options are used differently, having insight into the determinants affecting choices made by companies, can also be of interest to the IASB in the further development of her standard setting process. Of the 34 investigated options, 14 are rarely used differently and four of these options could be easily removed. The majority of the 34 options are, however, used differently and thus negatively affect the de facto comparability of European IFRS financial statements. The country is the most important determinant influencing accounting choices. Also, the type of auditor has an important impact on the format of financial statements and the disclosures.