The Impact of IAS vs. IFRS(Voluntary) and IFRS(Voluntary) vs. IFRS(Mandatory) on Accounting Quality over Time: Inferences from Jordan

Abstract

The aim of this study is to investigate the impact of applying IFRS by Jordanian listed companies on the value relevance (quality) of accounting financial reporting. Using a sample of Jordanian banks and industrial companies reporting under IAS during 1997-2002 period, and IFRS_Voluntary during 2003-2005 periods and IFRS_Mandatory during 2006-2014 period based on measures of earnings management, timely loss recognition and price-earnings association. The results show that we are unable to find systematic evidence that IFRS results in improved accounting quality for mandatory adopters over the last years. Our findings on earnings and book value of equity are becoming less value relevant during the IFRS_M period compared to both the IAS and the IFRS_V periods findings on earnings smoothing and timely loss recognition corroborate largely, while our findings with respect to the value relevance of accounting financial reporting. We do not find any change in meeting earnings targets for IFRS adopting relative to Jordanian companies. Further analysis shows that the value relevance (quality) of accounting financial reporting has worsened with the adoption of IFRS over time. Overall, these findings maintain several possible evidence of accounting quality improvement following the IFRS implementation and highlight the importance of accountings standards for financial reporting quality.

Keywords: IAS, IFRS adoption, Earnings management, Earnings smoothing, Value relevance, Jordan