Differences between domestic accounting standards and IAS: measurement, determinants and implications

By Yuan Ding, Ole‐Kristian Hope, Thomas Jeanjean, Hervé Stolowy. 2005

581 citations recorded by the source corpus.

This study analyzes determinants and effects of differences between Domestic Accounting Standards (DAS) and International Accounting Standards (IAS). We use an extensive list of differences between DAS and IAS to create two indices, absence and divergence. Absence measures the extent to which the rules regarding certain accounting issues are missing in DAS but are covered in IAS. Divergence applies in circumstances where the rules regarding the same accounting issue differ in DAS and IAS. It measures the extent of differences between DAS-based rules and IAS-based rules. Using a sample of 30 countries for 2001, we show that absence is (mainly) determined by the importance of the equity market and ownership concentration, while divergence is positively associated with the level of economic development and the importance of the accounting profession, but is constrained by the importance of equity markets. Our analysis suggests that a higher level of absence implies more opportunities for earnings management and for decreases in firm-specific information to investors. A larger divergence from IAS is associated with richer firm-specific information in capital markets.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/13e4416c4258ef652fa0f7ad6706fef7a4fa73dc

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Citations in the corpus

Do accounting standards matter? An exploratory analysis of earnings management before and after IFRS adoption (2008, background): “This is illustrated by the year 2005, which corresponds to the first application in most of the firms studied (see Table 1).”
Adopting a Label: Heterogeneity in the Economic Consequences of IFRS Adoptions * (2007, background): “However, as IFRS tends to be more accruals-based than local standards around the world (e.g., Hung, 2001; Ding et al., 2006), this effect likely works against our expectations.”
Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital (2009, unknown): “As prior research suggests, however, IFRS tends to reduce the amount of reporting discretion relative to many local accounting standards, and thus improves the standards’ comparability across countries (e.g., Ding et al. 2007).”
International differences in IFRS policy choice: A research note (2010, methodology): “Differences between national rules and IFRS were analysed by Nobes (2001), whose data form the basis of a study of factors influencing the scale of these differences by Ding et al. (2007).”
Have IFRS Affected Earnings Management in the European Union? (2010, background): “Ding et al. (2007), using a sample of 30 countries, conclude that simply adopting IFRS may not necessarily improve national accounting systems unless countries also implement profound changes in economic development policy, corporate governance mechanisms and financial market functioning in general.”
The European IFRS experiment: objectives, research challenges and some early evidence (2011, background): “(2010) EU M Earnings management 2 Legal institutions Pre-transition earnings management Ding et al. (2007) Global IAS–GAAP differences Ding et al.”
What drives mandatory and voluntary risk reporting variations across Germany, UK and US? (2015, unknown): “Ding et al. (2007) find that the differences observed between domestic and international accounting standards are significantly influenced by legal systems, shedding light on the latters’ impact, among other institutional factors, on the efforts to adopt a single set of accounting standards across t”
The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European Union (2010, methodology): “The absence index measures the extent to which the rules regarding certain accounting issues are missing in DAS but are required by IFRS (Ding et al. 2007).”
On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system (2008, background): “Differences between domestic accounting standards and IAS/IFRS can be explained by absence and divergence (Ding et al., 2007).”