The dark side of mandatory IFRS adoption : Does IFRS adoption deteriorate accrual reliability?

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Article number2150016
Journal / PublicationInternational Journal of Accounting
Issue number4
Online published30 Aug 2021
Publication statusPublished - Dec 2021


We examine a potential informational cost of adopting the International Financial Reporting Standards (IFRS). Using a difference-in-differences approach, we find that mandatory IFRS adoption leads to a significant decrease in accrual reliability. We also find that this negative relation between IFRS adoption and accrual reliability is more pronounced for firms (a) holding more financial instruments and (b) domiciled in jurisdictions with weak institutional features. The above findings are robust to alternative sampling and an extended sample period. Further analysis shows that reduced accrual reliability reflects a trade-off with increased value relevance and that outside investors fail to understand the IFRS-induced reductions in accrual reliability.

Research Area(s)

  • Accrual reliability, Fair value, IFRS, Institutional infrastructure

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Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).