0000000000901742
AUTHOR
Kjell Henry Knivsflå
Have IFRS Changed How Stock Prices Associate with Earnings and Book Values? Evidence from Norway
Firms listed on European, Australian and an increasing number of other stock exchanges are required to report according to International Financial Reporting Standards (IFRS). We use a Norwegian sample to examine whether the adoption of IFRS in 2005 has changed the value relevance of earnings relative to book values. IFRS are balance sheet-oriented and emphasize measurement at fair value. In contrast, Norwegian GAAP (NGAAP) are earnings-oriented and focus on measurement at transactional (historical) cost. IFRS also differ by recognizing more intangible assets, which further contributes to making IFRS less conservative than NGAAP. We find that more fair value accounting increases the value re…
Have IFRS changed how stock prices are associated with earnings and book values?
Purpose – The purpose of this paper is to examine how the mandatory shift from Norwegian Generally Accepted Accounting Principles (NGAAP) to International Financial Reporting Standards (IFRS) in Norway affected the valuation weights of earnings and book values, with the aim of gaining insights that are relevant for standard setters, investors and other users of accounting information. Design/methodology/approach – The authors extend the IFRS literature on structural shifts between the pre- and post-adoption periods by comprehensively controlling for factors that vary between the IFRS sample and the domestic Generally Accepted Accounting Principles (GAAP) sample. Moreover, the tests are des…