Analyst Following and Forecast Accuracy After Eliminating the 20-F Reconciliation Between IFRS and U.S. GAAP

Accounting Principles

In 2007, the U.S. Securities and Exchange Commission (SEC) decided to allow foreign private issuers to file financial statements prepared according to International Financial Reporting Standards (IFRS) without reconciliation to U.S. Generally Accepted Accounting Principles (GAAP). Using a sample of foreign private issuers from 35 countries/regions during the period of 2005 to 2008, this article investigates how the elimination of the 20-F reconciliation affects financial analysts. We find that it significantly reduces analyst coverage but has no impact on forecast accuracy. We show that analysts who are greatly affected are more likely to terminate their coverage of IFRS firms after the SEC’s rule than other analysts. In addition, we hypothesize and find that eliminating the 20-F reconciliation has a greater impact on firms whose 20-F reconciliation is more useful to analysts. For these firms, the elimination of the 20-F reconciliation significantly reduces both analyst coverage and forecast accuracy. Overall, our results suggest that the elimination of the 20-F reconciliation imposes costs on financial analysts.

Mandatory IFRS Adoption And Financial Analysts' Information Environment: Evidence From Korean Market

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v32i5.9767 ◽

2016 ◽

Vol 32 (5) ◽

pp. 1387

Author(s):

Saerona Kim ◽

Noolee Kim ◽

Kyoung-Min Kwon

Keyword(s):

Financial Reporting ◽

Financial Analysts ◽

Forecast Accuracy ◽

Information Environment ◽

Analyst Coverage ◽

Ifrs Adoption ◽

Information Sets ◽

Mandatory Adoption ◽

Korean Market

The paper examines the effects of the mandatory adoption of International Financial Reporting Standards (IFRS) on financial analysts’ information environment, specifically on analysts forecast accuracy in the Korean market. We find that financial analysts’ forecast accuracy improves after the mandatory IFRS adoption. We further investigate the source of observed accuracy enhancements and find that the improved forecast accuracy is attributable to the increased precision in analysts’ information sets for KOSPI firms and increased opportunity for earnings management for KOSDAQ firms. We also find that the analyst coverage in Korean market is reduced after mandatory IFRS adoption.

Good Intentions at Good Grains, Inc.

Issues in Accounting Education ◽

10.2308/iace-50296 ◽

2012 ◽

Vol 28 (1) ◽

pp. 115-129 ◽

Cited By ~ 1

Author(s):

Susan B. Hughes ◽

Cathy Beaudoin ◽

Russell R. Boedeker

Keyword(s):

Financial Reporting ◽

Financial Statements ◽

External Pressure ◽

Financial Accounting ◽

Managerial Accounting ◽

Ethical Considerations ◽

Gray Area ◽

Accounting Principles

ABSTRACT: This case addresses the “gray” area associated with the use of accounting discretion as it relates to expense line item reclassifications. Such a context allows for an examination of the pressures that influence accounting decisions, and provides a glimpse into how managers might manage reported expenses. The reader meets analyst David Johnson when, as a result of both internal and external pressure to keep research and development (R&D) costs within budget, he is asked to find ways to reclassify R&D costs into other expense areas. As a result of the request, David immerses himself in the task in order to identify, within generally accepted accounting principles (GAAP), opportunities to reclassify R&D expenses to cost of goods sold. He ultimately proposes three separate reclassification entries that, although technically within GAAP guidelines, involve the use of accounting discretion. All three entries are approved by the accounting team. Financial accounting, managerial accounting, and M.B.A. students report that the case enhanced their knowledge of financial reporting and helped them understand ethical considerations associated with the preparation of financial statements. Accounting professionals report the case realistically depicts what accountants face in the workplace. A case extension using International Financial Reporting Standards (IFRS) is also provided.

5. International differences and standardization

10.1093/actrade/9780199684311.003.0005 ◽

2014 ◽

Author(s):

Christopher Nobes

Keyword(s):

Financial Reporting ◽

Accounting Information ◽

Financial Statements ◽

International Differences ◽

Accounting Principles ◽

Accounting Numbers ◽

Accounting Rules ◽

Us Gaap

Just how different can accounting numbers be for the same company under different accounting rules? Which countries use International Financial Reporting Standards (IFRS)? In what main ways is US ‘generally accepted accounting principles’ (US GAAP) different from IFRS? How have politics and economics affected accounting? ‘International differences and standardization’ shows how international standardization simplifies the preparation of financial statements covering whole international groups and how it improves the comparability of the accounting information for managers and investors. Differences between US GAAP and IFRS are considered: US GAAP is more detailed than IFRS and tends to be written in terms of rules rather than principles. It also has fewer options.

International GAAP Differences: The Impact on Foreign Analysts

The Accounting Review ◽

10.2308/accr.2008.83.3.593 ◽

2008 ◽

Vol 83 (3) ◽

pp. 593-628 ◽

Cited By ~ 338

Author(s):

Kee-Hong Bae ◽

Hongping Tan ◽

Michael Welker

Keyword(s):

Financial Analysts ◽

Forecast Accuracy ◽

Accounting Standards ◽

Economic Costs ◽

Analyst Following ◽

Accounting Principles ◽

The World ◽

Two Measures ◽

The Impact

This paper investigates the relation between differences in accounting standards across countries and foreign analyst following and forecast accuracy. We develop two measures of differences in generally accepted accounting principles (GAAP) for 1,176 country-pairs. We then examine the impact of these measures of accounting differences on foreign analysts. In so doing, we utilize a unique database that identifies the location of financial analysts around the world, creating a sample that covers 6,888 foreign analysts making a total of 43,968 forecasts for 6,169 firms from 49 countries during 1998–2004. We find that the extent to which GAAP differs between two countries is negatively related to both foreign analyst following and forecast accuracy. Our results suggest that GAAP differences are associated with economic costs for financial analysts.

Making the Right Comparisons: Novartis AG

Issues in Accounting Education ◽

10.2308/iace.2007.22.4.721 ◽

2007 ◽

Vol 22 (4) ◽

pp. 721-733 ◽

Cited By ~ 6

Author(s):

Elaine Henry ◽

Ya-Wen Yang

Keyword(s):

Financial Performance ◽

Financial Reporting ◽

Financial Statements ◽

International Financial Reporting Standards ◽

Reporting Standards ◽

Accounting Principles ◽

The Right ◽

Analytical Skill

This case introduces the concept of convergence between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). The scenario involves a securities analyst's evaluation of Novartis AG's financial performance under IFRS and U.S. GAAP, and provides an opportunity to examine the issues giving rise to differences under the two sets of standards. Based on the company's 20-F disclosure, the case uses the reconciliation footnotes to recast the company's IFRS financial statements to U.S. GAAP. The analytical skill of adjusting financial statements is useful beyond the IFRS-to-U.S. GAAP context.

Case Study: Differences Between US And International Financial Statements

Journal of Business Case Studies (JBCS) ◽

10.19030/jbcs.v7i5.5608 ◽

2011 ◽

Vol 7 (5) ◽

pp. 101-102

Author(s):

Dolores Rinke

Keyword(s):

Financial Reporting ◽

Financial Statements ◽

International Financial Reporting Standards ◽

Reporting Standards ◽

Accounting Principles ◽

Us Gaap

This case examines the differences in format and terminology in financial statements between US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Students download the financial statements of two different companies in the same industry; i.e., Nokia (reporting under IFRS) and Motorola (reporting under US GAAP). Questions related to the differences in format and terminology are addressed.

Impact of Changes in Accounting Standards on Earnings Management

Koya University Journal of Humanities and Social Sciences ◽

10.14500/kujhss.v2n2y2019.pp166-175 ◽

2020 ◽

Vol 2 (2) ◽

pp. 166-175

Author(s):

Kawa W. Muhamad ◽

Subhi M. Saleh ◽

Kees van Paridon

Keyword(s):

Earnings Management ◽

Financial Reporting ◽

Accounting Standards ◽

Reporting Quality ◽

Quality Standards ◽

Financial Reporting Quality ◽

High Quality ◽

Accounting Principles

This study considers the question whether the changes in Accounting Standards has led to companies making less use of earnings management. The paper is an attempt to investigate whether the application of high quality standards like International Financial Reporting Standards (IFRS) is related to high financial reporting quality. This study addresses this issue empirically. Furthermore, this research examines whether German companies that have applied IFRS have less earnings management compared to German companies that report according to the German Generally Accepted Accounting Principles (GGAAP). The sample, consisting of two equally large listed companies in Germany (Südzucker Group and Henkel Group) from 2003-2014. The study suggests that IFRS-adopters show different earnings management performance compared to companies reporting under German GAAP. This finding contributes to the discussion on whether high quality standards are appropriate and operational in countries with weak investor protection rights. The result shows that adopters of IFRS in Germany can be related with less use of earnings management as a result of changes in accounting standards. This result is contradictory with previous research that was done by Van Tendeloo and Vanstraelen, (2005), and consistent with the previous research conducted by Ball et al. (2003).

Ruckman, Inc.: Converting from U.S. GAAP to IFRS

Issues in Accounting Education ◽

10.2308/iace-10020 ◽

2011 ◽

Vol 26 (2) ◽

pp. 341-360 ◽

Cited By ~ 7

Author(s):

Rebecca Fay ◽

John A Brozovsky ◽

Patricia G Lobingier

Keyword(s):

Financial Reporting ◽

Accounting Standards ◽

Financial Statements ◽

The United States ◽

Securities And Exchange Commission ◽

High Demand ◽

Accounting Courses ◽

Cpa Exam ◽

Two Phases

ABSTRACT This case is designed as a comprehensive review of significant differences between accounting principles generally accepted in the United States of America (U.S. GAAP) and International Financial Reporting Standards (IFRS) for specific topics covered during most Intermediate Accounting courses. The task requires you to analyze and evaluate a company's significant accounting policies for compliance with IFRS as you plan and conduct the conversion of a firm's financial statements from U.S. GAAP to IFRS. The skills developed throughout this case are currently in high demand as IFRS is quickly becoming the global norm in accounting standards and many multinational companies based in the U.S. are already affected by these standards. The Securities and Exchange Commission (SEC) has developed a roadmap that may require U.S. companies to begin adopting IFRS in 2015. You will be tested on your knowledge of IFRS on the CPA exam. The case is presented in two phases, allowing you to experience the conversion process from planning to execution.

An analytical study on impact of international financial reporting standards on financial statements and ratios of Indian companies

YMER Digital ◽

10.37896/ymer21.01/24 ◽

2022 ◽

Vol 21 (01) ◽

pp. 261-266

Author(s):

Dr. Nabha Kamble ◽

Keyword(s):

Financial Reporting ◽

Emerging Economies ◽

Analytical Study ◽

Financial Statements ◽

Investment Climate ◽

Accounting Standard ◽

The World ◽

International Accounting Standard

India is one of the emerging economies in the world. For economic development, foreign direct investment (FDI) is needed, to facilitate the investment climate. There is a need to integrate its financial reporting with rest of the economies of the globe so that investors from outside will appreciate the financial results and financial positions of the companies. This will provide uniformity and comparability of financial statements with the financial statements prepared in other countries. At present, Indian companies are preparing their financial statements as per Generally Accepted Accounting Principles in India (Indian GAAP). These Principles are based on IFRS issued by International Accounting Standard Board (IASB). However, these principles were modified substantially as per Indian laws and practices.