Financial statement effects of adopting IFRS: the Canadian experience

Abstract

Purpose

The purpose of this study is to examine the effects of adopting International Financial Reporting Standards (IFRS) on financial statements of the largest Canadian firms (S&P/TSX 60) listed on the Toronto Stock Exchange (TSX).

Design/methodology/approach

This study investigates the financial statement effects of 46 companies from the S&P/TSX 60 index which report under IFRS in 2011 and switched to IFRS from CGAAP. This study used panel data analysis, which can be considered as more powerful when conducting cross-sectional and in time analysis among companies. Because of weakness of Cramer statistic on R-square, the authors used interaction terms as suggested by Hope (2007).

Findings

Consistent with the authors’ perceptions, this study finds that significant effects of adopting IFRS are associated with industry practices. The empirical results show that the adoption of IFRS in Canada created more relevant financial reporting for book value of equity and net income in the post-adoption periods.

Originality/value

This study should be of interest to the US regulators considering IFRS adoption by US publicly traded companies as well as to regulators, standard setters and listed companies in all countries worldwide that are in transition to IFRS.

Citation

Jermakowicz, E.K., Chen, C.-D. and Donker, H. (2018), "Financial statement effects of adopting IFRS: the Canadian experience", International Journal of Accounting & Information Management, Vol. 26 No. 4, pp. 466-491. https://doi.org/10.1108/IJAIM-08-2017-0096