DOES MANDATORY IFRS ADOPTION IMPROVE ACCOUNTING QUALITY? EVIDENCE FROM TAIWAN

10.6292/AFPF.2016.07.07

Ho-Chyuan Chen；Shiou-Yen Chu；Che-Wei Wu

IFRS ； GAAP ； Income Smoothing ； Earnings Management ； Value Relevance

Advances in Financial Planning and Forecasting

7期（2016 / 10 / 01）

141 - 163

英文

This paper examines the impact of the adoption of International Financial Reporting Standards (IFRS) on Taiwanese listed companies. We employ ten metrics, classified in income smoothing, report aggressiveness and value relevance, to test whether accounting quality has improved after mandatory IFRS adoption in Taiwan beginning in 2013. The 2012 financial statements under local Generally Accepted Accounting Principles (GAAP) are also required to be restated with IFRS. These statements provide us useful information to evaluate the effect of adopting an alternate accounting standard. Our sample covers over 800 listed firms in Taiwan during 2011 to 2013. Our results can be summarized as follows. Relative to 2012, we find evidence of significant decreases in income smoothing and in discretionary accruals as well as a significant increase in timely recognition of large losses in 2013. However, relative to 2012, we do not find any significant increase in value relevance after mandatory IFRS adoption. Our results contribute to the existing debate on whether adopting IFRS improves accounting quality. They also prompt regulators in emerging economies to be aware that the effectiveness of adopting IFRS may not be consistent with reducing earnings management and amplifying value relevance.

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