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Accounting quality of UK firms under IFR Accounting quality of UK firms under IFR... - Complex Object ()
Title
Accounting quality of UK firms under IFRS / Nelunika Samarasekera
Author
Year
2013
Abstract
[Truncated abstract] The aims of this study are to examine whether the adoption of International Financial Reporting Standards (IFRS) in the United Kingdom (UK) has resulted in better accounting quality for UK firms and the specific mechanisms which may have contributed to improvements in accounting quality post IFRS. The specific mechanisms I investigate are: (a) the greater use of fair value measurement and associated more extensive disclosure requirements imposed by IFRS compared to UK GAAP (measurement and disclosure), (b) more extensive disclosure requirements alone imposed by IFRS compared to UK Generally Accepted Accounting Principles (UK GAAP) (disclosure only) and, (c) improvements in the regulatory activities and institutional oversight systems in foreign countries that impact on cross listed firms (enforcement). Prior to the adoption of IFRS for financial years beginning 1 January 2005, UK firms reported under UK GAAP. My sample consists of 495 firms listed on the London Stock Exchange and I collect data from calendar years 2000 to mid 2009. I use eight individual measures of accounting quality in the categories of earnings smoothing, managing towards earnings targets, timely loss recognition and value relevance. Firms are said to have improved their accounting quality if they display lower levels of earnings smoothing, less management towards earnings targets, timelier loss recognition and higher levels of value relevance. My results indicate that in general, accounting quality in UK firms improved post IFRS adoption in terms of displaying less management towards earnings targets and improved value relevance. However, there is no evidence that accounting quality improved with regards to reducing earnings smoothing and improving timeliness of loss recognition.
Next I investigate the specific mechanisms by which IFRS may have caused accounting quality to improve. The proxies I use to investigate the first mechanism, namely the greater use of fair value measurement and associated disclosure requirements imposed by IFRS, are financial assets, financial liabilities and intangible assets. The results show that the greater use of fair value measurement and more disclosure requirements imposed by IFRS for these three proxies led to improvements in accounting quality by reducing managing towards earnings targets. For the financial assets proxy, there was evidence that the value relevance of accounting numbers improved in terms of the relationship between returns and earnings. However, the other measures of accounting quality did not show improvements. Therefore, the overall result is mixed for this mechanism. Next I investigate the second mechanism whereby I examine whether the greater disclosure requirements alone imposed by IFRS (compared to UK GAAP) for segment reporting led to improvements in accounting quality. As these changes only increased disclosure and are not intended to change earnings measurement practices, this mechanism was tested using only the value relevance measures of accounting quality. There was no evidence that the greater disclosure requirements for segment reporting contributed to improvements in value relevance, thereby accounting quality in UK firms...
Identifier
http://repository.uwa.edu.au:80/R/-?func=dbin-jump-full&object_id=34701&silo_library=GEN01
Type
Thesis (Ph.D.)--University of Western Australia, 2013
Persistent URL
http://repository.uwa.edu.au:80/R/-?func=dbin-jump-full&object_id=34701&silo_library=GEN01
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