Cormier - JOURNAL OF INTERNATIONAL ACCOUNTING RESEARCH Vol...

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First-Time Adoption of IFRS, Managerial Incentives, and Value-Relevance: Some French Evidence Denis Cormier, Samira Demaria, Pascale Lapointe-Antunes, and Robert Teller ABSTRACT: This paper investigates whether and how managerial incentives infuence the decision to elect optional exemptions when Frst adopting International ±inancial Reporting Standards ~ I±RS ! . It also examines the value-relevance o² the mandatory and optional equity adjustments that must be recognized as a result o² the Frst-time adoption o² I±RS. Both questions are addressed in the context o² the mandatory adop- tion o² I±RS by ±rench Frms in 2005. Three major Fndings emerge ²rom our analyses. ±irst, managerial incentives infuence the decision to strategically elect one or more optional exemptions at the transition date. Second, mandatory equity adjustments are more valued than ±rench generally accepted accounting principles ~ GAAP ! equity, sug- gesting that the Frst-time adoption o² I±RS by ±rench Frms is perceived as a signal o² an increase in the quality o² their Fnancial statements. Third, the value-relevance o² optional I±RS equity adjustments depends on whether they result in the disclosure o² new in²ormation. Keywords: accounting choices; I±RS 1; mandatory equity adjustments; optional exemptions . I. INTRODUCTION T his paper investigates whether and how managerial incentives infuence the decision to elect optional exemptions when Frst adopting International ±inancial Reporting Standards s I±RS d . It also examines the value-relevance o² the mandatory and optional equity adjust- ments that must be recognized as a result o² the Frst-time adoption o² I±RS. Both questions are addressed in the context o² the mandatory adoption o² I±RS by ±rench Frms in 2005. ±irms listed on European stock exchanges are required to use I±RS in their consolidated accounts since Janu- ary 1, 2005 to comply with Regulation Act EC 1606/2002. The European Union s EU d Parliament mandated the adoption o² I±RS to improve the integration o² capital markets within Europe, and between Europe and the rest o² the world. However, widespread adoption o² I±RS also resulted in Denis Cormier is a Professor at the Université du Québec à Montréal, Samira Demaria is a Lecturer at the Université de Nice Sophia-Antipolis, Pascale Lapointe-Antunes is an Assistant Professor at Brock University, and Robert Teller is a Professor at the Université de Nice Sophia-Antipolis. The authors acknowledge the Fnancial support o² the Social Sciences and Humanities Research Council o² Canada s SSHRC d , l’Autorité des marchés Fnanciers s Québec d , and the Corporate Reporting Chair s UQAM d . JOURNAL OF INTERNATIONAL ACCOUNTING RESEARCH American Accounting Association Vol. 8, No. 2 DOI: 10.2308/jiar.2009.8.2.1 2009 pp. 1–22 Published Online: November 2009 1
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a fundamental change in European Frms’ Fnancial reporting since they previously followed a variety of country-speciFc generally accepted accounting principles s GAAP d that sometimes dif-
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Cormier - JOURNAL OF INTERNATIONAL ACCOUNTING RESEARCH Vol...

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